Kindle Fire Teardown Shows Tablet A Loss Leader

A breakdown of the components used in Kindle Fire shows Amazon is losing about $10 per tablet sold, lending credence to the view that the e-merchant sees the device not as a profit center but as a conduit for selling subscription media services and physical goods. Analysts at market watcher iSuppli tore down the Kindle Fire and estimated that the total cost of its components is $209.63. Amazon is selling the tablet for $199. The analysts said Amazon will make up for the loss through the additional sales generated by Kindle, particularly sales of physical, high-margin consumer goods. "The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content," said iSuppli. "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."

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