Photo: Steve Kovach, Business Insider
The Kindle Fire’s $199 price tag means that Amazon is taking a hit on its profit margins, Reuters reports.Of course it is. That’s the point.
As Gene Munster noted Wednesday, Amazon could lose up to $50 for every tablet sold. Reuters says Amazon could ship 4 or 5 million tablets before 2011 ends.
Amazon has a long history of selling stuff at slim margins or a loss in order to gain rapid adoption. It really had no choice but to do the same with the Fire.
Amazon is one of the few companies out there that can afford to take a huge hit like this in order to get people using its tablet.
UPDATE: It costs an estimated $210 to make a Kindle Fire, Reuters reports, citing iSuppli. That means Amazon may only be taking a $10 hit on each Fire sold.