Re: future of the Amazon Kindle

At 11:13 PM +0000 4/22/08, you wrote:
>Silence speaks volumes....
>
>The fact that Amazon refuses to publish actually sales numbers sets off
>loud alarm bells. What shareholders want to know is "Are we making
>money on the Kindle?" They don't want, or need a meaningless pep talk.


I tend to agree. If the sales were high enough to make the public or shareholders think it was a big hit, Amazon would be trumpeting them.

I don't think that necessarily means that Amazon isn't breaking even on the project. It just means that the sales aren't high enough to be an obvious success.

I think it is possible that at the end of Amazon's next fiscal year (don't know when that is -- June? December?), we will hear something about its sales. I agree that shareholders will probably expect to know at that point.


>The Kindle is not part of Amazon's core business.

Really? And how do you define Amazon's core business?

Amazon seems to be willing to sell just about anything to anybody. Books certainly aren't the only thing in its core business. And Amazon's continuing expansion of what it sells makes me think that it isn't even too worried about sticking to any type or types of products as its core business.

Its core business must be more like "Internet retailing" or "Electronic retailing" than any particular product. In that vein, the Kindle could well be part of its core business -- in fact it could be seen as critical to the future development of its business.


>As the economy
>worsens Amazon will be forced to rethink their investments in non-core
>areas. At some point in the future Amazon will either sell the device
>off to an electronics company such as Sony or get out of the business.
>

Didn't we decide at one point that the Kindle might cost Amazon $100-$150 each to manufacture? (I can't remember and I'm too lazy to look it up). I think we also decided that the total investment might be in the $10 million to possibly $50 million range.

Are you saying that the Kindle is losing so much money that it will be sold off? That Amazon can't finance this investment in the long run?

I don't want to say that the Kindle is cheap for Amazon, but I have the impression that it is fairly easy for Amazon to cover the costs of this investment from its other profits.

For Amazon to want to sell off the Kindle, I think it would have to be an ongoing failure -- i.e., the expenses of operating the system in a month would have to be lower than the revenues brought in. That is, the total sales for a month, would have to be lower than the cost of the items sold (i.e., royalties to the publishers/authors), the other transaction costs (credit card fees, network fees), and the cost of keeping the network up and running.

While I have no idea really, I can't see that this would be true. Sales would, IMO, have to be less than a few thousand a month.


I don't see Amazon selling or closing the Kindle ever, almost regardless of how well accepted it is, unless another, better, ebook reader comes along that takes over the market and marginalizes the Kindle.

Kent



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