Amazon Spends More Than It Asks For The Kindle Fire

At a price of $ 199 (134 euros), Amazon’s Kindle Fire is sold for less than half the cheapest iPad from Apple , and is intended as a “vending machine” for music, videos and books sold online.

The total cost of Kindle Fire‘s components is $ 185.60. Once assembled at the factory, the production cost of Fire increases to $ 201.70, IHS iSuppli estimated. According to IHS iSuppli, LG Display supplied the most expensive component of the Fire, the display, which costs almost half the total cost of the components. Texas Instruments manufactures the processor, a key victory for this company in its battle with Nvidia and Qualcomm to supply the brain of the Kindle Fire.

Amazon’s device has received good reviews for its attractive price and very good internet connection. But the lack of extras such as a camera, microphone and other accessories make the Kindle Fire seem less versatile than the iPad and other tablets rivals such as the Samsung Galaxy Tab.

Analysts expect Amazon to sell between 4 and 6 million handsets during the crucial holiday quarter .

“It’s a good product, not great, and it has a very good price,” wrote Walt Mossberg in the Wall Street Journal. But “Fire’s hardware is crude and simple. It is a black box with no style.”

The low profit margins of the world’s largest retailer have fallen in recent quarters, but Wall Street has given the CEO Jeff Bezos carte blanche to invest in future growth.

But some analysts are skeptical of Amazon’s digital push, warning that consumers will not be willing to re-purchase music or other digital content to fill their Kindle Fire tablets.

The service for streaming video from Amazon also falls behind Netflix. ”A multimillion-dollar investment to create a competitor anti Netflix streaming will be very destructive to Amazon’s cash flow and margins,” said Brian Nowak Nomura in a Friday note.

Amazon said in October that could lose money in the fourth quarter because of heavy investments in Kindle Fire and other projects that might not generate immediate income.

The Fire will be released this week, before its archnemesis, the Nook Tablet from Barnes and Noble. The device is marketed by the library at $ 249, but has twice the memory.

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