Comments on: Amazon Kindle 2 costs about $185.49 to build, $359 to own

By: Johnny D

Johnny D — Fri, 24 Apr 2009 20:02:14 +0000

I think Amazon would do very to offer these options:

1. “Free” + monthly fee for first 2 years, like a cell phone plan
2. cheaper + monthly fee for 1-2 years. Charge more money over time, but not so much up front.

Amazon would have Wii-like supply/demand issues. That initial price is a tough pill to swallow, even if the wireless subsidy makes it make snese.

By: kindlelover

kindlelover — Fri, 24 Apr 2009 05:33:57 +0000

I thought I would never buy a Kindle. Wrong!! I read a ton of books every year and I love this thing. It’s worth every penny I paid for it.

By: Joe

Joe — Thu, 23 Apr 2009 14:26:52 +0000

You guys are overestimating the amount of bandwidth the kind takes on the Sprint network….downloading a book isn’t a lot of memory…and once it’s downloaded…it’s downloaded.

The browser on the kindle sucks so badly that I doubt anyone really uses it for web-browsing.

By: Roy

Roy — Thu, 23 Apr 2009 13:23:05 +0000

R&D cost are manage in three ways.

1 – the vendor or the design house will charge Amazon a Non-Recurring Engineering (NRE) fees, which Amazon will probably pay in different stages of the design and milestone. This is a fix cost Amazon have to book in their finance.

2 – the vendor amortize the NRE expenses into the products, lets say for example, the R&D cost quoted by the design house is $120,000, Amazon commit to purchase 1 million units, then each unit cost will increase by 12 cents, which is acceptable.

3 – the last one which depend on the business relationship between Amazon and the design house or the vendor, the vendor may possibly waive the NRE cost in exchange for repeat business in the future, which for Amazon means a free R&D cost.

By: badonkadonk

badonkadonk — Thu, 23 Apr 2009 11:56:38 +0000

R&D costs are never included in BOM as they are fixed expenses – on a balance sheet they are just lumped into the “cost of business” to sort out profit from revenue.

That said, I am consistently concerned that iSupply low-balls their BOM costs because they make assumptions on what negotiated prices the vendor is getting for parts. Definitely OEMs are going to get a better deal that public prices when they’re ordering millions instead of thousands, but iSuppli generally just “guesses” on what they think the cost should be. However, their tear-down analyses are always top notch in terms of sorting out what components are what.

By: boogereater

boogereater — Thu, 23 Apr 2009 10:30:22 +0000

I highly doubt amazon is paying much to Sprint for the data plans… You guys act like this is the first technology to use cellular wireless data that’s not a phone nor mobile broadband…. Fedex has had powerpads for a few years and they use at&t to transmit wireless data, and how may employees do they have driving around? Tons.

By: Maui

Maui — Thu, 23 Apr 2009 08:44:10 +0000

What about r&d?

By: Roy

Roy — Thu, 23 Apr 2009 06:15:18 +0000

From the tear down analysis,
parts alone is 176.83
labor is 8.66
normally outside analysis will forgot
G&A (estimate) 5.56
Margin (estimate) 9.55 (for manufacturer)

Total cost for Amazon $201.05 (purchase from manufacturer)

Assuming sea Freight and duties
24.13

Amazon landed cost is about 225.18

Therefore Amazon is keeping 60% margin on top of landed cost, if you deduct the operating expenses and others, Amazon decent margin will be somewhere between 25% to 38%. Just average I would say.

By: Corinne

Corinne — Thu, 23 Apr 2009 02:53:36 +0000

I’m actually finding it hard not to buy this. And if my rent goes down, like I hope it does, I might just get it for my bday.

By: Alex

Alex — Thu, 23 Apr 2009 00:08:19 +0000

Unlimited cellular data access can’t be cheap. Would you like it if the Kindle cost $200, and then you paid 2 bucks a megabyte (or 30 bucks a month) for data usage like usual? I didn’t think so.

By: sarah

sarah — Wed, 22 Apr 2009 23:43:13 +0000

I agree with Allen. Considering the fact that (nearly all) books are only $9.99, and the fact that ALL OF THE WIRELESS ACCESS IS FREE, I don’t think that this discrepancy between supplier costs and buyer price (if it’s true) is at all a bad trade-off.

I would suggest that people stop complaining about the price, else Amazon decides to re-neg on their FREE wireless data package. (and, considering wireless data packages cost anywhere between $10-99 per month, I’d say this is not something anybody wants.)

By: Allen

Allen — Wed, 22 Apr 2009 22:56:43 +0000

Yeah, I also don’t think that TOO high considering all the other costs AMAZON has to pay.

By: gokmen

gokmen — Wed, 22 Apr 2009 22:55:14 +0000

How accurate are these figures from Isuppli? I really don’t think the margin stated above is that great considering the marketing expenses etc. Having said that amazon makes money on the titles that’s beamed to the gadget too, so I guess that should help them with margins also.

By: PickMe314

PickMe314 — Wed, 22 Apr 2009 22:53:58 +0000

people actually buy those? They are hideous