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Piper Jaffray estimates Amazon will lose $50 per Kindle Fire

post #1 of 234
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A note by Gene Munster of Piper Jaffray, says Amazon's Kindle Fire is "not a true competitor, but more competitive than expected," while noting the Internet retailer "is likely losing about $50" on each unit it sells.

Not a true competitor, but stronger than expected

Munster wrote that the "Kindle Fire's 7 inch screen compared to the 10 inch iPad is a bigger difference than the numbers make it seem," noting, as Apple's Steve Jobs did last year, that "a 7 inch screen is only 45% as large as the iPad's 10 the screen." Jobs' comments at the time were directed at RIM's PlayBook and the Samsung Galaxy Tab, predicting that the market wouldn't embrace either and stating that the only reason competitors were introducing the smaller screens is because they couldn't afford to build full size tablets at a price completive with the iPad.

Munster added that despite less storage, no cameras and lacking a 3G mobile data option, the Kindle Fire "is more competitive than we anticipated due to its new movie, music, and web browsing capabilities."

Amazon "likely losing about $50 per Kindle Fire"

The analyst added that "Amazon appears to be focusing on a product with superior content delivery; the company is leveraging its wide range of content assets available for sale in conjunction with its Cloud Services product for world class, mobile, digital delivery."

"Apple is also monetizing the hardware upfront with a 30%+ gross margin on the iPad, whereas Amazon is likely losing about $50 per Kindle Fire."

The difference between Apple and Amazon also extend to their "supply chain, production and distribution capabilities," Munster noted, where Apple's sophistication in operations gives it "a competitive advantage over Amazon, which may find it difficult to produce more than a few million Kindle Fires for the holiday season."



Android technology without the Android features

Many tech bloggers originally dismissed Apple's iPad as "just a big iPod touch," and "only good for consumption, not creation," while predicting that Android would open up the market for tablets by creating an ecosystem full of choices.

Over the past year, Google's Android 3.0 Honeycomb release failed to generate much interest in the company's open platform, while the Amazon Kindle Fire is now getting the most attention as a viable contender, despite actually being a larger iPod touch-like device limited to consumption both by its components and Amazon's restricted content delivery channel.

The new Kindle Fire's custom version of Android prevents it from running Honeycomb apps, from buying software from any Android store, or from being undercut in hardware by Chinese manufacturers, the three main reasons Android was widely expected to offer Apple significant competition in the tablet market.

"The loser here is not Apple, Gartner analyst Michael Gartenberg told Ars at the device's unveiling. The loser, if anything, is Google and the Android ecosystem.

Gartenberg pointed out that at Amazon's press conference, Android was barely mentioned and Google wasnt mentioned at all.

Amazon's Kindle Fire, like the similarly priced Nook Color from Barnes & Noble, is tied to a single store and does not run Google's mainstream edition of Android for tablets.
post #2 of 234
Amazon "likely losing about $50 per Kindle Fire"
Yeah, but they make it up on volume!
post #3 of 234
Anybody who thinks Amazon loses money on these things is insane. Who the hell loses money on a high margin product (tablets) in order to support a no-margin business (online retail)?
post #4 of 234
Curious to see if Google counts these as 'Android devices' sold, activated.
Curious to see if folks count these as 'Android tablets' in marketshare.

Quote:
Originally Posted by poke View Post

Anybody who thinks Amazon loses money on these things is insane. Who the hell loses money on a high margin product (tablets) in order to support a no-margin business (online retail)?

Amazon makes plenty of money on the content they sell, such as ebooks. They don't want to lose too much money on these tablets but they can afford to lose some. They can't complete head-to-head against the iPad, so they have to offer something compelling at a cheaper price point, perhaps trying to take the iPad on from a different angle down the road with a refreshed product.

Just because it's a tablet does not mean it is a 'high-margin' product.
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post #5 of 234
Quote:
Originally Posted by Mister Snitch View Post

Amazon "likely losing about $50 per Kindle Fire"
Yeah, but they make it up on volume!

To be honest, they'll make it up from users buying their content.
post #6 of 234
I think it will hurt the other android tablets and help Apple sell more iPads.

Some will get this because it's cheap and later graduate to the iPad when they have the money.

It will soon be seen that the iCloud and other features in iOS 5 will give iOS a huge advantage over everyone else.

Just you wait!
post #7 of 234
If Gene Munster say that they lose $50 on each Fire you can bet that they're earning at least $20 on each
post #8 of 234
Since the object of marketing and advertising is to dupe consumers into believing a product is better than it actually is I'd say Amazon has a winner. I envision some ignorant consumers confusing Fires with iPads and therefore taking a minute share away from iPad.
post #9 of 234
Quote:
Originally Posted by MJ Web View Post

Since the object of marketing and advertising is to dupe consumers into believing a product is better than it actually is I'd say Amazon has a winner. I envision some ignorant consumers confusing Fires with iPads and therefore taking a minute share away from iPad.

Let me guess, you pray five times a day in the direction of Cupertino?
post #10 of 234
Apple could buy a few billion $ of these and dump them...
post #11 of 234
Quote:
Originally Posted by grub View Post

Apple could buy a few billion $ of these and dump them...

They honestly could....Amazon just ends up losing a lot of money.
post #12 of 234
Quote:
Originally Posted by addicted44 View Post

They honestly could....Amazon just ends up losing a lot of money.

Yep, Amazon loses money. No revenue from selling content. Hurts their whole model.
The only 'gotcha' (other than Apple's burning of some cash) is Amazon can say they've sold $QUANTITY units up front.
post #13 of 234
Quote:
Originally Posted by kriskkalu View Post

I think it will hurt the other android tablets and help Apple sell more iPads.

Some will get this because it's cheap and later graduate to the iPad when they have the money.

It will soon be seen that the iCloud and other features in iOS 5 will give iOS a huge advantage over everyone else.

Just you wait!

I can see where this will cannibalize some Android tablet sales, but not necessarily buying into your theory about it improving iPad sales. I'd wager there's a significant portion of iPad users that would get by just fine doing the same activities on a Kindle Fire. Many are just consuming content, which is exactly what Amazon's device is made for. What's new is they are doing it cheap and integrating it with their product line to reduce the fragmentation effect you generally get with Android.

Apparently no one has let you in on the fact that Android, WebOS and other platforms have already been syncing into 'the cloud' for some time. To claim this feature is some sort of magnificent leap and provides an advantage over other devices is a bit silly.
post #14 of 234
Quote:
Originally Posted by Xian Zhu Xuande View Post

Curious to see if Google counts these as 'Android devices' sold, activated.
Curious to see if folks count these as 'Android tablets' in marketshare.


Google won't be able to count these because the 'activation' of Kindle Fire would not go through Google at all. In fact Amazon, as usual, will keep their sales secret.

Other folks (surveys) will try to count them but won't be accurate because as I mentioned, Amazon won't publish sales figure.
post #15 of 234
Fire sale indeed.

Quote:
Originally Posted by Mister Snitch View Post

Amazon "likely losing about $50 per Kindle Fire"
Yeah, but they make it up on volume!

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post #16 of 234
Quote:
Originally Posted by MJ Web View Post

Since the object of marketing and advertising is to dupe consumers into believing a product is better than it actually is I'd say Amazon has a winner. I envision some ignorant consumers confusing Fires with iPads and therefore taking a minute share away from iPad.

The only reason consumers would confuse a Fire with an iPad is because of bad reporting that compares the two.
post #17 of 234
Hmm I just read today that is cost them $180 to make, so maybe my math is off but that is $19 per device they will make....not lose.

DED you are scared, I can smell your fear. The iPad finally has a real contender, backed a equally if not larger echo system.

Sure the iPad is a technically better device but so is the Xoom compared to the iPad. The rell DIFFERENCE here is $300.

Not a single user will care what OS it will run, provided it can do what they want. Every single app you can buy for it on Amazon will run on it, vs the other Andriod tablets and massive fragmentation/apps.

It is like Amazon stole Andriod from Google and watched and learned from Apple. I Love IT!!!!

My pre-order goes in today.
post #18 of 234
This holiday season, many buyers will choose an iPad over the Kindle(s), etc. because they want the iOS,iTunes and App Store experiences. Those who don't, well, Amazon had better get "it's" android experience right else shoppers will be returning them in droves on the 26th and heading to the Apple store on the 27th.

"The great race for 2nd place in the iPad space continues unabated at a furious pace with Apple as the reigning Ace. All other imitators should save face and exit the race with grace before the worst-case, your shareholders have you replaced for running said race and finishing last place."

Good luck Amazon
post #19 of 234
Quote:
Originally Posted by kriskkalu View Post

I think it will hurt the other android tablets and help Apple sell more iPads.

Some will get this because it's cheap and later graduate to the iPad when they have the money.

It will soon be seen that the iCloud and other features in iOS 5 will give iOS a huge advantage over everyone else.

Just you wait!

You underestimate how good a product this Kindle Fire is. Once you buy it and then sign up for Amazon Prime, you're hooked. It'd be like Netflix, only cheaper and you can only use all the services with the Kindle Fire. The iPad will be a poor substitute because the switch cost of losing some of the Prime services using just the iPad would be big enough that customers won't want to switch.
post #20 of 234
Quote:
Originally Posted by drobforever View Post

Google won't be able to count these because the 'activation' of Kindle Fire would not go through Google at all. In fact Amazon, as usual, will keep their sales secret.

Other folks (surveys) will try to count them but won't be accurate because as I mentioned, Amazon won't publish sales figure.

Better yet, like today's Kindle that uses a gimped version of Andriod, it will come pre-setup with your amazon account and NOT need any kind of PC to get going...unlike the iPad.
post #21 of 234
Quote:
Originally Posted by King of Beige View Post

This holiday season, many buyers will choose an iPad over the Kindle(s), etc. because they want the iOS,iTunes and App Store experiences. Those who don't, well, Amazon had better get "it's" android experience right else shoppers will be returning them in droves on the 26th and heading to the Apple store on the 27th.

"The great race for 2nd place in the iPad space continues unabated at a furious pace with Apple as the reigning Ace. All other imitators should save face and exit the race with grace before the worst-case, your shareholders have you replaced for running said race and finishing last place."

Good luck Amazon

Maybe iCloud will be as good as.....

https://www.amazon.com/clouddrive/le...320744-0217565

Apple had better get "it's" iCloud right..............this time around.

Good luck Apple
post #22 of 234
Quote:
Originally Posted by poke View Post

Anybody who thinks Amazon loses money on these things is insane. Who the hell loses money on a high margin product (tablets) in order to support a no-margin business (online retail)?

Amazon. I can believe that they are trying this on for size. I just don't believe it will succeed in making them money.

And so far, except for Apple, there is no evidence to show that anyone making tablets is making a penny on those sales. With Apple's 30% GM on iPads, which I believe to be true, it should be very difficult for anyone else to make money. This is why we see the Motorola Zoom 32GB 3G model debuting at $800; $71 MORE than Apple's model. It's also why we see the 7" Playbook retailed at $500; the same as Apple's 9.7" version. Same thing for the first Samsung 7" Tab at $500. First tier manufacturers try to make quality products, and that will cost them more than it costs Apple, but how much can they charge?

So I see Amazon hoping that somehow, they can make up this $50 with increased sales. I don't think it will work though, as their net margin (profit) last year was a measly 3.37%.

But Amazon has long put its potential profits back into the company. It could be doing that here. Hey, if people buy an additional $2,000 a year from them, it might work.
post #23 of 234
Quote:
Originally Posted by bettieblue View Post

Better yet, like today's Kindle that uses a gimped version of Andriod, it will come pre-setup with your amazon account and NOT need any kind of PC to get going...unlike the iPad.

1) You fail to miss the irony that the most popular Android-based tablet will be forked, closed and propriety version of the OS, not the almighty¬°, open source OS you think will dominate the consumer market.

2) There is no Kindle device today that utilizes Android OS in any way. There will be one in mid November which will likely be a month after Apple releases iOS 5.0.

3) How masochistic are you to come to this forum just to get your ass handed to you with every post you make?
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post #24 of 234
Quote:
Originally Posted by Xian Zhu Xuande View Post

Amazon makes plenty of money on the content they sell, such as ebooks. They don't want to lose too much money on these tablets but they can afford to lose some. They can't complete head-to-head against the iPad, so they have to offer something compelling at a cheaper price point, perhaps trying to take the iPad on from a different angle down the road with a refreshed product.

Just because it's a tablet does not mean it is a 'high-margin' product.

No, they don't make plenty of money on content and, no, they can't afford to lose money on a tablet. They made $1 billion in profit last year on $34 billion in revenue. At $50 loss per tablet, 20 million tablets/year would be $1 billion in losses. If Amazon is smart they're looking at the Kindle as a way to be move up, not as a loss leader for the razor thin margins of online retail.
post #25 of 234
Quote:
Originally Posted by bettieblue View Post

Maybe iCloud will be as good as.....

https://www.amazon.com/clouddrive/le...320744-0217565

Apple had better get "it's" iCloud right..............this time around.

Good luck Apple

iCloud is better. http://www.appleinsider.com/articles...nes_match.html

Get a clue bettieblue.
post #26 of 234
Quote:
Originally Posted by King of Beige View Post

This holiday season, many buyers will choose an iPad over the Kindle(s), etc. because they want the iOS,iTunes and App Store experiences. Those who don't, well, Amazon had better get "it's" android experience right else shoppers will be returning them in droves on the 26th and heading to the Apple store on the 27th.

"The great race for 2nd place in the iPad space continues unabated at a furious pace with Apple as the reigning Ace. All other imitators should save face and exit the race with grace before the worst-case, your shareholders have you replaced for running said race and finishing last place."

Good luck Amazon

This Kindle tablet might be a longterm benefit for Apple. Popping down 40% the cost of the iPad might be a good way for consumers to get a feel for how a tablet could work into their usage needs, which could push them to invest into the $500+ iPad tablet with a much better app and media ecosystem, which also includes access to Kindle books and likely future access to Amazon's ecosystem since that is their main focus, not the HW.
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post #27 of 234
In other news BMW is going out of business because everyone is buying cheaper cars from General Motors. Oh no sorry it's the other way around

There are plenty of cheap tablets out there already but they are all crap which is why nobody wants one.

If they loose $50 per device and sell 10m of them thats a loss of $500m. Great business model!
post #28 of 234
Quote:
Originally Posted by bettieblue View Post

Hmm I just read today that is cost them $180 to make, so maybe my math is off but that is $19 per device they will make....not lose.

It's your understanding rather than your maths that is off.

What was reported earlier is that an analyst estimated the Fire's bill of materials to be $180. That doesn't mean it costs Amazon $180 to make a Fire, it means if you add up the cost of the components that go into a Fire, it comes to $180. So that $180 doesn't include assembly costs, shipping, support, cost of returns/failures, R&D or overheads. If the BOM really is $180, I'd say it's an optimistic guess that Amazon loses only $50 per sale at $199 retail price.
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post #29 of 234
Amazon like Apple will get a massive discount on parts so that $180 can come down to as low as $50.

Only they know what the parts list is but there are better tablets out there selling for near the same, and without Amazon's mega purchase power.
post #30 of 234
Quote:
Originally Posted by bettieblue View Post

Hmm I just read today that is cost them $180 to make, so maybe my math is off but that is $19 per device they will make....not lose.

DED you are scared, I can smell your fear. The iPad finally has a real contender, backed a equally if not larger echo system.

Sure the iPad is a technically better device but so is the Xoom compared to the iPad. The rell DIFFERENCE here is $300.

Not a single user will care what OS it will run, provided it can do what they want. Every single app you can buy for it on Amazon will run on it, vs the other Andriod tablets and massive fragmentation/apps.

It is like Amazon stole Andriod from Google and watched and learned from Apple. I Love IT!!!!

My pre-order goes in today.

$180 is just BOM probably and doesn't include R&D, licensing, packaging, delivery, among others. So Amazon probably is losing money off of it. But they do that all the time. That's their business model to lose money on one thing and make it up on another.
post #31 of 234
Quote:
Originally Posted by aBeliefSystem View Post

Amazon like Apple will get a massive discount on parts so that $180 can come down to as low as $50.

Only they know what the parts list is but there are better tablets out there selling for near the same, and without Amazon's mega purchase power.

The only way they will get a large discount is if they can order tens of millions of them the way Apple does. Otherwise, they will pay ablutions the same as everyone else. Apple also gets massive discounts because they buy equipment for manufacturers as well as paying for the expansion of their plants to manufacturer parts and assemblies for Apple that gets discounted back to Apple once manufacture begins.

There are no good tablets selling for anything close to what Amazon is going to charge.

You also know nothing about manufacture if you think those numbers can come down to $50. If it were Apple, it could come down to maybe $140, and even that's really low.
post #32 of 234
Quote:
Originally Posted by bettieblue View Post

Hmm I just read today that is cost them $180 to make, so maybe my math is off but that is $19 per device they will make....not lose.

Stop your FUD. You were a full participant in a previous thread just a little earlier where these issues were thrashed out in depth.

The $19 is gross margin, not profit.

Under any remotely reasonable set set of assumptions, the profit is likely to be negative.
post #33 of 234
Quote:
Originally Posted by bettieblue View Post


Sure the iPad is a technically better device but so is the Xoom compared to the iPad. The rell DIFFERENCE here is $300.


Given that the iPad's ASP is over six bills, people could buy two of these and have more than $100 left over to buy content.
post #34 of 234
Quote:
Originally Posted by melgross View Post

The only way they will get a large discount is if they can order tens of millions of them ....

It is not obvious that Amazon has the capabilities (yet) for managing a supply and retail chain for hardware in the tens of millions. It took Apple decades of experience to get here in terms of such capabilities.

Looks like Munster is belatedly recognizing the same point when he says "..."supply chain, production and distribution capabilities." The other analysts are not quite there yet....
post #35 of 234
Seems the Kindle Fire competes against the iPod Touch - and does it well for someone who wants a similar device with a larger screen- better for reading on.

I don't see this competing with the iPad at all.
I would have to play with one first thou before I make a judgement. Like SJ said about the first iPad; You have to hold one in your hand to understand it.
post #36 of 234
Quote:
Originally Posted by bettieblue View Post

Hmm I just read today that is cost them $180 to make, so maybe my math is off but that is $19 per device they will make....not lose.

DED you are scared, I can smell your fear. The iPad finally has a real contender, backed a equally if not larger echo system.

Sure the iPad is a technically better device but so is the Xoom compared to the iPad. The rell DIFFERENCE here is $300.

Not a single user will care what OS it will run, provided it can do what they want. Every single app you can buy for it on Amazon will run on it, vs the other Andriod tablets and massive fragmentation/apps.

It is like Amazon stole Andriod from Google and watched and learned from Apple. I Love IT!!!!

My pre-order goes in today.

That's really cool that they don't have to package it, ship it, market it, etc. All free, apparently.

Amazon can lose money up-front on the device and still make it up if they sell enough content, and they certainly have a chance at that. I've bought most of my ebooks for Kindle, not iBooks, given that iBooks doesn't let me read on my e-ink screen (uh, which this color Kindle doesn't have either...) and doesn't let me look at the books on my Mac.

So Kindle has content advantages, but it doesn't appear to have anything going for it that would make it more of an iPad competitor than the Nook Color - which is presumably why B&N shares were down on the news. A 7" screen, slower CPU - other 7" tablets are taking the main hit there. Of course, given that you can get the Kindle reader app for the iPad, if you want to read on an LCD there's no advantage to the Fire other than up-front cost - certainly not apps, screen size, speed, etc.

So please, go pre-order and get yourself all excited. You can of course get the same thing for a few $ more today over at B&N.
post #37 of 234
Quote:
Originally Posted by aBeliefSystem View Post

Amazon like Apple will get a massive discount on parts so that $180 can come down to as low as $50.

Only they know what the parts list is but there are better tablets out there selling for near the same, and without Amazon's mega purchase power.

Maybe if Amazon is shopping for parts individually at Radio Shack, but you do realize that the margin on the parts for the component suppliers is unlikely to be 250% given that Amazon is already ordering relatively large numbers, right? Can we all assume you're just kidding?
post #38 of 234
Quote:
Originally Posted by bettieblue View Post

Hmm I just read today that is cost them $180 to make, so maybe my math is off but that is $19 per device they will make....not lose.

DED you are scared, I can smell your fear. The iPad finally has a real contender, backed a equally if not larger echo system.

Sure the iPad is a technically better device but so is the Xoom compared to the iPad. The rell DIFFERENCE here is $300.

Not a single user will care what OS it will run, provided it can do what they want. Every single app you can buy for it on Amazon will run on it, vs the other Andriod tablets and massive fragmentation/apps.

It is like Amazon stole Andriod from Google and watched and learned from Apple. I Love IT!!!!

My pre-order goes in today.

Besides the fact that you are, apparently, on the wrong website's forum, and consequently are consistently wrong; would you please, PLEASE stop saying "echo system"? You did it in this thread, and in another thread several times. It's "ecosystem."

"You keep using that word. I do not think it means, what you think it means." ~ Inigo Montoya
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