Amazon Sells Kindle Fire At A Loss

Amazon’s Kindle Fire tablet costs $209.63 (£130) to build, according to an analysis by IHS iSuppli Teardown Analysis Service. That figure includes $191.65 in materials in addition to manufacturing expenses.

Amazon plans on retailing the 7-inch tablet for $199.

Promoting physical goods

“The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content,” read a 30 September research note accompanying the analysis. “Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business.”

That strategy could pay off for Amazon in the long run. “So far, no retailer has managed to create an umbilical link between digital content and a more conventional retail environment,” the note added. “With Kindle, Amazon has created the most convincing attempt at this yet.”

In terms of hardware, the IHS iSuppli Teardown Analysis Team – which plans on conducting a more exhaustive teardown once the tablet actually reaches the marketplace – believes that the Kindle Fire is likely to leverage “design elements and component selections from the PlayBook tablet by Research In Motion”. Taiwan-based Quanta Computer manufactures both those devices.

The Kindle Fire’s user interface is designed for easy access to Amazon’s multimedia content, including books and movies. The device is equipped with a Gorilla Glass-toughened screen, a 1GHz dual-core processor, 8GB of internal storage and roughly eight hours of battery life. Amazon Silk, a mobile web browser developed in-house, leverages Amazon’s EC2 cloud (in addition to the tablet’s hardware) to speed website rendering.

The big question now is whether the Kindle Fire’s presence on the open market will negatively affect sales of other tablets, including Apple’s iPad and the growing legions of Google Android devices. Some pundits are arguing that more than enough room exists in the marketplace for the iPad and the Kindle Fire to peacefully coexist side-by-side, particularly if people treat the iPad as a laptop replacement and the Kindle Fire as a multimedia peripheral along the lines of the iPod.

Tablet battle

However, others are predicting a tooth-and-nail battle between the various tablet manufacturers for supremacy. If that comes to pass, Amazon will almost certainly prove a formidable competitor thanks to its immense marketing budget.

Days after unveiling its Kindle Fire tablet, rumours also erupted about Amazon potentially acquiring Palm.

Citing an anonymous and “well placed” source, VentureBeat claims the online retailing giant “is in serious negotiations to snap up Palm from HP”.

Former Palm chief executive Jon Rubinstein, who joined HP once the latter snatched up his company for $1.2 billion in 2010, currently sits on Amazon’s board of directors. HP had used Palm’s webOS operating system, previously used for the Palm Pre smartphone, as the software foundation for its TouchPad tablet. However, HP decided to end TouchPad production in the wake of anemic sales, putting Palm’s future in doubt.

However, Palm’s patents might prove useful to Amazon, given the intellectual-property lawsuits increasingly zinging around the tech world.