Amazon income drops as Kindle Fire burns margins - Page 2

Nice pun but its true. The ones they are gunning for are B&N. They want to make sure that any tablet ebook is a Kindle and not a Nook. To the point they are going to allow rooting which surprises me. For $200 I'll buy one although the NC doesn't seem as clunky. I'll see what the NC 2 looks like first though.

Just wait for the "Fire Fire Sale"

So true. Bad for Apple not beating massivly, outrageous predictions of growth and merely having massive growth.

I doubt the Kindle fire expenses would be enough to effect earnings. Amazon has a lot huge business areas.

As many have said in this forum, Apple concentrates on the hardware. The iTunes store's sole purpose is to support and ad value to it's hardware, starting with the iPod. They didn't build the iPod to sell more (low profit) song, they built the iTunes Store to sell more (high profit) iPods. Amazon appears to be making little profit on the hardware, and is possibly losing money. Then they are hoping that these owners will buy the content to help gain back some of their profits. The problem is that Amazon is likely only making around 30% profit on the content that they sell. A $.99 song or a $3.99 movie will only achieve a vey low profit. So a $200 device will only make about $30 in profit IF the owner buys several songs, movies or books that totals about $100.

Considering the target buyers for the kindle, that could be a very big IF. I give it 6 months until there is a jailbreak for the Kindle Fire and owners will be able to attain media and apps from any source over the internet. Owners already actually have the ability to download movies, songs and pirated software at no cost. Does Amazon actually believe the Android buyer won't circumvent the Amazon market and get their content elsewhere? I am going to bet and over half of the Kindle Fire buyers are actually looking for a low cost "device" just to jailbreak and use for other purposes other then the Amazon Market. The Android owners tend to be "tinkerers" and have no interest in staying in any "walled garden" be it Apple's or Amazon's.

Unless they change their profit strategy, this does not make good business sense.

I'm using a Counterpoint DA-10 DAC.

The Mac Cube is perfect for a music server over a network to an Airport Express. It's quiet because it's fanless. It has a small footprint. The G4 450 Mhz CPU running Tiger is plenty fast enough. And it looks good sitting next to my stereo. The only draw back is the 128 GB limit for an internal HD. There's a software solution but I just put my lossless iTunes library on a 500 GB external FW drive ( That is powered by the FW.) The Cube also has VGA out. Which means I can use my flat screen TV (with RGB input) in the room as the monitor when starting up. Once I'm in iTunes I can see everything with my iPad or Touch and I can turn off the TV. The only other drawback is that it has no USB2. But I really don't need it as a lossless music server. My iPods, Touch and iPad are sync to the iTunes library on my other Macs. The other Mac that would be a good music server is an old G4 Mac Mini. Better specs than a Cube and probably cheaper (in the use market), but don't quite have the cool factor of the Cube.

Right now, I'm only using it as my music server (for lossless music). The Mac Cube would probably be OK running iPhoto on a connected TV. But the Mac Cube won't make a good video server (for movies) because it has a slow graphics card and no digital audio out. Which means no Digital Dolby. You can mod it and add a better graphics card but you would also need to add a fan. To use it on an Apple TV, you need to be running Leopard. And the Cube would be way too slow for that. Though you can get Leopard on it. You really need a Mac Mini with an Intel CPU for a video server.( And to connect to an Apple TV.) A Power Mac G5 will work as a video server but it can't be in the same room as the TV because it's too noisy with all those fans running. Plus it has a big footprint.

I found it hilarious when fandroids complaining about "closed Apple" were looking towards Amazon as their savior. They make Walmart proud with their monpsonistic practices in teh book industry.

Amazon claims that they're making millions more than they expected of these. That means that the total number is probably something like 10 million units. Earlier reports were that they were losing $20 per unit - for a total loss of $200 M. That's certainly a significant drop since they earned $279 M in the same quarter last year.


Just to note that the above is overkill for most people. The majority of people will be quite happy with simply plugging your Airport Express into your stereo with no need to use a DAC.

The iPhone IS more expensive. Carriers pay apple hundreds of dollars more per iPhone than HTC, Samsung, and the likes.

The difference is that carriers are willing to eat up the difference, because an iPhone owner is extremely valuable (partially because Apple bears a lot of the support costs, but also because iPhone users are more loyal to the iPhone, than Android users are, which makes them a better bet to stick with their existing carrier after their 2 year contract, than someone who is more likely to change their phones).

I'm sure both surfing and email will work just fine, but that brings no revenue to Amazon. That would explain also why they don't have the Android Market; the Amazon Store seems quite adequate though, and will continue to grow.

Well, I guess losing $0 to $50 (unclear) on a tablet beats paying Apple a 30% cut of sales for merely delivering a 4.6 MB application.

Most companies wish that they had quarter like apple did. Not hitting estimates is not the same as having a bad quarter. Income and profits were record setting!!

What got me specifically about Amazon's results was that if they really believed in it, they would be amortizing expenses over a product life cycle. They have a(several) "good" product(s) that will appeal to a lot of people, especially at the price point. But, they need to garner $100 profit from future sales or advertisements from each product sold. Let's be optimistic and triple their current margin-- they need $1,000 in e-book, music, advertisements, or product sales per *device*.

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True; for them to build an ecosystem, they have to be at the top of the chain. The question really becomes can they build an ecosystem before the sales tax rules kick in within two years?

Also... why is their cloud business not doing more?

"So we feel very good about where we are right now and the opportunities that we have in front of us."

i like their strategy, i like it a lot!

the Kindle e-reader increased sales of Amazon's only high-margin sales category: books. that product was smart business.

and offering a more powerful version of it to keep up and compete in that same high-margain retail category with Barnes and Noble's Nook Color (and the basic media functions of all other tablets with competing bookstores, including Android and iPad) is a market necessity. a $250 or $300 device would have accomplished that goal.

but to sell the $200 Fire at a loss in the many millions, aiming at the much bigger tablet market beyond book readers and hoping to grab a big share of that hardware market with a below-cost price, is just crazy. because as everyone here points out, there are little or no profit margins in selling digital media or apps too.

i had thought Amazon was going to launch a "shopping appliance" tablet, to really lock people into buying most everything through Amazon and its "partners." but such an appliance would certainly need a simple camera to scan bar codes for in-store comparisons for price-undercutting by Amazon - and the Fire doesn't have a camera at all! and Amazon would have to partner with some supermarket chains to channel everyday household shopping needs and deliveries into its system (i don't think any of the on-line supermarket shopping/delivery options are doing well). eventually Amazon might acquire and integrate other retail web services - like Open Table, or Expedia, or whatever - until they could pretty much run their customers entire lives' for them.

but Amazon's Fire instead is fixated on replicating a part of Apple's ecosystem (and Google's wannabe too) - the loss leader part, but not the profit making part. i think this is more about Bezos' ego than any well thought-out strategy.

They should have called it the Envy.

Settling for "good enough" is no way to gain happiness ...... according to my wife, at least.

Amazon has some policies that I as a writer (medical lexicography, don't get too excited, folks) find nothing less than outrageous. They pay royalties of 70%, for books that cost $10 OR LESS and 35% thereafter. This means that if I price a project at $20, then I get the same $7, with the rest going into Jeff B et al's pockets. So in response, I don't let amazon have any of my more expensive products, and only give them to Apple. I know I'm not the only author who finds amazon's practices unacceptable and doubt I'm alone in my schadenfreude at their present and future financial woes. Hopefully it will get bad enough for them to play fair with authors

Sure, you will.

But this whole fiasco was written in stone from Day 1. It's like Amazon trying to repeal the law of gravity -- won't work.

Just wait and see: this will get worse, and then worser (because they'll have to pull a Reed Hastings): I'll bet Bezos is ruing the day he stepped into this mess, and wondering what he can do to undo.

The issue is where their future growth is expected to come from. It's from stuff like Kindle and Fire.

The "huge business areas" are already priced in.

Yeah, but the market is reacting to the shape of things to come. And, the fact that a lot of SG&A spending for it has probably happened already.

I was just thinking that same thing. But they would have startup costs. Apple always tempers their guidence when new products are expected, attributing lower margins to these costs. I haven paid attention to Amazon's guidence, so I done know exactly what they had said, other than they expected lower net this past quarter. They expect a possible loos next.

This is unequivocally the dumbest post I've ever read on here. I've never once heard people dismiss things based only how much they cost.

While it is silly to dismiss something solely on the basis of its price, if you plot quality (by whatever standard you wish to measure it) against price, there is clearly a correlation.

A lot of comments here sound a lot like what people said about Android and the iPad when it launched.

I'm waiting for the next iPad but I can fully see the appeal of the KF, especially to anybody already sourcing content from Amazon. It's a decent yet cheap media consumption device. This is exactly what most people want.

The execution is brilliant too. They get the OS for free and strip Google out of it. Contrary to popular belief they aren't fragmenting the OS either. They used Gingerbread because Google didn't release Honeycomb and Ice Cream Sandwich wasn't out yet. I expect they'll upgrade to ICS next year so that developers can get more APIs. Ironically, because Amazon can upgrade all its devices, it may see the newest and best Android apps on here.

Well excuse me- it's music iTunes content that made the iPod and lack of movie/ video content that has kept the ATV as a lonely hobby. Most people have no idea what the hell an Apple TV is- have you ever even seen a commercial for it?

Amazon is doomed!
This isn't the first time Jeff Bezos was predicted doom and gloom. This Fire will sell like hotcakes- perfectly marketed nowwithn TV advertising in time for holiday sales.

I think most people can understand the appeal, from the (potential) consumer end. What I, and others, are questioning is how exactly Amazon plans on making money.

If it's true that they are selling each Fire at a loss, then they have to make-up for that loss through profits that are driven by someone owning the Fire.

I don't know enough about Amazon's business to know if this is possible, likely, or whatever. I also don't know if there are enough untapped markets in which Amazon can use the Fire (where they couldn't have relied on simply making money their old fashioned way). I just don't know.

But selling a piece of hardware at a loss, and hoping that people will gobble up content for a small margin, thus recouping the initial loss and leading to profits ... that sounds like at least a semi-dangerous plan, in this particular market. Doesn't it?

The iPad outlasts the Kindle Fire. You're referring to the eInk-based Kindles though the article is referring to the Kindle Fire eroding Amazon margins.