Attention Amazon Shoppers, the Kindle Fire is Now on Bluelight Special

A report released last week claims that Amazon is losing money on each Kindle Fire sold. IHS iSuppli estimates that the device costs Amazon $209.63 to build. The Kindle Fire retails for $199.99. Best case scenario, Amazon negotiated extraordinary deals with its suppliers and is making a few dollars on each device sold.

The Kindle Fire does not have high gross margins. Amazon is not interested in making money on hardware sales. Instead, the Kindle Fire will introduce users to other aspects of the Amazon ecosystem. Books, movies, music and even retail items can all be purchased on the device. Jeff Bezos built his empire on delivering content to the consumer. The Kindle Fire facilitates this process.

Amazon has the chance to do something that HP could not. Amazon can afford to sell the Kindle Fire at a loss. Money lost is made up by selling content, which is something Amazon happens to be very good at. To Amazon, the Kindle Fire is a loss leader.