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Teardown exposes Amazon’s Kindle 2 cash cow

TGD Staff April 23, 2009 1,010

El Segundo (CA) – iSuppli has run another hardware teardown, this time hitting Amazon’s Kindle 2 e-book reader. At $360, it isn’t particularly cheap to begin with, but the analysis actually revealed that Amazon can build it for relatively little money, translating into a fat, Apple-challenging profit margin.

If iSuppli is right, then Amazon spends about $185.49 in materials and manufacturing costs, excluding other costs such as development, shipping, marketing and PR. If we add a industry average of about 10% of the total price of the device to iSuppli’s amount then it seems that Amazon can deliver the Kindle 2 to your door for about $230.

That would put the Kindle 2 profit margin at about 36%, and about 48%, if we leave development, shipping, marketing and PR out of consideration. That is clearly Apple territory and an impressive achievement on Amazon’s side. Apple’s consumer electronics products such as the iPod or the iPhone are typically in the 35 – 45% range.

iSuppli believes that Amazon spends about $60 on the E-Ink display, $39.50 on the wireless broadband module provided by Novatel Wireless, as well as $13.18 on the Qualcomm’s MSM6801A single-chip baseband processor.

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