Amazon Flexes the Razor and Blades Strategy for Kindle Fire

According to IHS iSuppli, the new Kindle Fire tablet costs $209.63 to make, but Amazon.com (NASDAQ:AMZN) will be selling it for only $199 online. While this leaves Amazon $10 dollars in the hole for each tablet sold, they believe the low price will spur future sales of Amazon products from Kindle purchasers.

The tablet market is currently under the thumb of Google’s (NASDAQ:GOOG) Android operating system, being supported by major companies like Samsung, Motorola (NYSE:MMI), and HTC. This raises concerns about the financial security of Amazon’s decision to push below-production prices for the new Kindle. Yet Amazon’s goal is to get the new tablet into as many hands as possible, and effectively reign in a larger costumer base.

“The real benefit of the Kindle Fire to Amazon (NASDAQ:AMZN) will not be in selling hardware or digital content. Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business,” IHS iSuppli said in a statement.

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