Amazon has been investing a lot on its tablets (including the Kindle Fire), and this shows on its quarterly earnings: the profits for the giant online retailer are down 73%, and the stock is taking a dive in after-hours and the losses stand at 14% for now. We’ll see what it really looks like tomorrow.
But even if the quarter’s net income of $63M falls short of last year’s $231M, Amazon is hardly in any danger, and the game here is to sell tablets at cost (or at a loss) in order to make profits from sales of digital goods in the future. This is a business model that has been successfully used by game consoles, although I would stop the comparison there because the tablet market is very different in both variety and eco-system.
Still, Amazon is not there to “fight” against Apple, Samsung and other tablet makers. What Amazon really wants to do is to enable more people to shop for Amazon’s digital content, and if that means giving them a tablet for cheap, then so be it. The question is whether or not Amazon can sell enough digital good to make up for the hardware cost/losses? In theory, they could, and if that’s indeed true, they may come back stronger than ever.
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