Piper Jaffray estimates Amazon will lose $50 per Kindle Fire

Posted:
in iPad edited January 2014
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 wasn?t 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.
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Comments

  • Reply 1 of 233
    Amazon "likely losing about $50 per Kindle Fire"

    Yeah, but they make it up on volume!
  • Reply 2 of 233
    pokepoke Posts: 506member
    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)?
  • Reply 3 of 233
    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.
  • Reply 4 of 233
    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.
  • Reply 5 of 233
    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!
  • Reply 6 of 233
    gwydiongwydion Posts: 1,067member
    If Gene Munster say that they lose $50 on each Fire you can bet that they're earning at least $20 on each
  • Reply 7 of 233
    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.
  • Reply 8 of 233
    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?
  • Reply 9 of 233
    Apple could buy a few billion $ of these and dump them...
  • Reply 10 of 233
    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.
  • Reply 11 of 233
    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.
  • Reply 12 of 233
    neo42neo42 Posts: 287member
    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.
  • Reply 13 of 233
    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.
  • Reply 14 of 233
    solipsismsolipsism Posts: 25,726member
    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!



  • Reply 15 of 233
    neo42neo42 Posts: 287member
    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.
  • Reply 16 of 233
    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.
  • Reply 17 of 233
    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
  • Reply 18 of 233
    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.
  • Reply 19 of 233
    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.
  • Reply 20 of 233
    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
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