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Kindle Fire may reduce Amazon profits

The challenge to Apple's iPad mounts as Amazon are due to release their new, low cost Kindle Fire tablet. So far Apple have remained king of the tablet market with staggering sales of their iPad and iPad 2 but analysts seem certain that the Kindle Fire will take the number 2 spot, if not this year then the next.

Amazon announce their profits today, and according to BloomBerg Business, they may report a net income of $115.8 million, a 50 percent drop from this time last year.

The Kindle Fire may hit Amazon hard as they are selling the tablet at a loss. Analysts are claiming that revenue for the company will increase 45 percent to $10.9 billion in Q3, but the focus on sales volume may hit the profit margins.

The Kindle Fire is set to be released at only $199, which is less than half the price of Apple's iPad 2. The Amazon plan is to make money on sales of software, books and entertainment from their online store – downloaded directly to the customer device. The loss on each device is said to be $10.

Amazon are playing a volume sales game with the Kindle Fire, which is always a risky business. Fortunately they have had plenty of experience selling the Kindle e-reader, which has held the top sales spot now for some time. They have plenty riding on the success of the Kindle Fire, but we are sure it will be a success. They have the customer base already waiting for the low cost tablet and with such an impressive store infrastructure already in place we think it will sell millions of units before the end of the year.

Kitguru says: Kindle Fire going to set sales alight? Amazon hope so.

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