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Kindle 2 Tear-Down Reveals Price of Components

timothy posted more than 4 years ago | from the venturing-to-gain dept.

Handhelds 169

adeelarshad82 writes "Amazon's wildly popular Kindle 2 got a good old fashioned tear-down from the folks at market research firm iSuppli. According to the organization, the Kindle 2's manufacturing cost is almost half as much as its retail price."

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And you are surprised? (5, Insightful)

arizwebfoot (1228544) | more than 4 years ago | (#27678235)

the Kindle 2's manufacturing cost is almost half as much as its retail price

So . . . ?

Is this supposed to be some new business model. I remember working at Monkey Wards and they would raise the prices 400% and then have a 1/2 off sale.

It's the American way.

Re:And you are surprised? (3, Insightful)

ArcherB (796902) | more than 4 years ago | (#27678373)

Well, in fairness, Amazon could sell the units at a loss and make up the difference on digital book sales much like the console manufacturers do.

But, I agree with you. If these units are selling, why lower the cost?

Re:And you are surprised? (0)

Anonymous Coward | more than 4 years ago | (#27678739)

*Gasp*, they don't give it away free? Colour me shocked... ... Actually I wonder if they did give it away free, what effect that would have on ebook sales? *hmmm ponders*

Re:And you are surprised? (1)

Fulcrum of Evil (560260) | more than 4 years ago | (#27678797)

Well, in fairness, Amazon could sell the units at a loss and make up the difference on digital book sales much like the console manufacturers do.

Aside from the Xbox, who sells consoles at a loss?

Re:And you are surprised? (1)

cromar (1103585) | more than 4 years ago | (#27678867)

Nintendo says Wii is not sold at a loss (or so I hear). PS3 is sold at a loss [mydigitallife.info] .

Re:And you are surprised? (1, Informative)

Anonymous Coward | more than 4 years ago | (#27679269)

Well, in fairness, Amazon could sell the units at a loss and make up the difference on digital book sales much like the console manufacturers do.

Aside from the Xbox, who sells consoles at a loss?

This has been fairly standard practice since the PS1 days.

Re:And you are surprised? (1)

Fulcrum of Evil (560260) | more than 4 years ago | (#27680431)

Well, in fairness, Amazon could sell the units at a loss and make up the difference on digital book sales much like the console manufacturers do.

Aside from the Xbox, who sells consoles at a loss?

This has been fairly standard practice since the PS1 days.

No, it's a recent phenomenon. The first was the Dreamcast, which catered, then the Xbox, which would've cratered if it was anyone other than MS bankrolling it.

Re:And you are surprised? (0)

Anonymous Coward | more than 4 years ago | (#27679781)

historically the wii is the first in around 4 generations not to be sold at a loss

Re:And you are surprised? (1)

i.of.the.storm (907783) | more than 4 years ago | (#27680315)

I don't think Nintendo consoles are ever sold at a loss.

Re:And you are surprised? (4, Insightful)

tixxit (1107127) | more than 4 years ago | (#27679137)

But, I agree with you. If these units are selling, why lower the cost?

Valve had a 3000% increase in sales of Left 4 Dead by cutting the price in half. Why lower the cost if they are selling? So you can sell even more!

Re:And you are surprised? (5, Insightful)

maxume (22995) | more than 4 years ago | (#27679217)

If you are selling your entire production run of a physical good, cutting the price in half just means that you take in half the revenue.

Re:And you are surprised? (0)

Anonymous Coward | more than 4 years ago | (#27679549)

That requires you to have a higher price to begin with, though. The effect isn't made when you start something off with a low price, you only get those kinds of sales when you PUT IT ON SALE.

Re:And you are surprised? (5, Informative)

Anonymous Coward | more than 4 years ago | (#27679633)

You do know that Kindle was sold-out for the longest time, since production couldn't keep up with demand?
They have no need to increase the sales at this point.

Also: there are very real dangers in lowering price for products; human mind tends to consider more expensive products as better, higher-quality things.
Conversely, lowering price can dillute the brand.

So there is very little point for Amazon to reduce the price significantly at this point.

Re:And you are surprised? (2, Insightful)

tixxit (1107127) | more than 4 years ago | (#27680247)

True. On the other hand, increased demand gives them more reason to up the production rate. The Kindle is also very expensive for what it DOES (not what it is). An e-reader really should be significantly cheaper then, say, a Netbook.

Re:And you are surprised? (1, Insightful)

Anonymous Coward | more than 4 years ago | (#27679645)

Software is a non-rivaled good - it's not possible to "buy the last one". L4D is distributed primarily via Steam, so it's non-rivaled. The kindle is a physical object... it's a rivaled good.

Your comparison fails.

Re:And you are surprised? (4, Insightful)

Captain Splendid (673276) | more than 4 years ago | (#27678381)

It's the Retail way.

Fixed that for you.

Re:And you are surprised? (0)

Anonymous Coward | more than 4 years ago | (#27678503)

It's the American way.

Fixed that back for you.

Re:And you are surprised? (3, Informative)

Ortega-Starfire (930563) | more than 4 years ago | (#27680519)

Let me fix that one more time for you.

It's the Ferengi way.

Which proves the fix above you is correct, not yours, as according to Rule 284 of the Rules of Acquisition:

Deep down, everyone's a Ferengi.
 

Re:And you are surprised? (1)

binaryseraph (955557) | more than 4 years ago | (#27680001)

Well put. American's get too much flack for business practices. Fact is- everyone world wide is out to make a buck in the retail world. Cheers!

Re:And you are surprised? (1)

stonewallred (1465497) | more than 4 years ago | (#27678461)

Funny. The company I worked for sells (yes, I quit and went back to school, but keep abreast of prices)R-22 for $58.00 a pound and R-410A for $64.50 a pound. They cost respectively approx. $180 per 30 pounds for R-22 and approx. $180 per 25 pounds for R-410A. For the mathematically challenged, that is a cost of $6.00 a pound for R-22 and $7.20 a pound for R-410A. I will let someone else figure the mark up for them.

Surprised compared to razors/razor blade model (0)

Anonymous Coward | more than 4 years ago | (#27678773)

You would think like the game console model, you would cheaply sell the razor, knowing you were going to make your money on the sale of razor blades.

Based on their numbers and this model, Kindle should be selling for $100 or less. I can't believe they are selling it for 100% markup. I guess suckers are born twice a minute on Kindle day.

Re:And you are surprised? (1)

Yeef (978352) | more than 4 years ago | (#27679651)

Keystoning [about.com] is a pretty common thing in retail. I don't think this is really news.

Re:And you are surprised? (2, Insightful)

Shadow of Eternity (795165) | more than 4 years ago | (#27679949)

Wait, you mean people try to sell physical products for more than it costs to make them so they can profit off of the sale?

What a novel concept!

And the other half... (5, Insightful)

rodrigoandrade (713371) | more than 4 years ago | (#27678239)

Is R&D, marketing, distribution, and profit.

Big deal.

Why is this news again??

Re:And the other half... (4, Insightful)

Anonymous Coward | more than 4 years ago | (#27678305)

Also remember that each Kindle has an unlimited cell modem plan built in. Those aren't cheap.

Re:And the other half... (1)

ceejayoz (567949) | more than 4 years ago | (#27680205)

The cell modem is likely subsidised by the prices of books more than the initial hardware sale. Plus, they're relatively tiny files.

Re:And the other half... (1)

Burkin (1534829) | more than 4 years ago | (#27678313)

Why is this news again??

kdawson didn't have any Microsoft FUD articles to post today so timothy is picking up the slack.

No kidding. (4, Funny)

JCSoRocks (1142053) | more than 4 years ago | (#27678321)

This. Just. In. There's a markup on retail goods! Also, the sky is generally blue and you need oxygen to live.

Re:And the other half... (1)

Achromatic1978 (916097) | more than 4 years ago | (#27678941)

I notice that although this is being defended (and rightly so), there's not the amazingly defensive and outraged fanboy rampage that you get when you see articles like "iPhone components cost $120! ZOMG!"...

Re:And the other half... (1)

neonleonb (723406) | more than 4 years ago | (#27678969)

Also, free cellular internet. http://xkcd.com/548/ [xkcd.com]

Re:xkcd (1)

mlheur (212082) | more than 4 years ago | (#27679785)

The third frame of that comic should read ~on't Pani~

Re:And the other half... (2, Insightful)

morgan_greywolf (835522) | more than 4 years ago | (#27679023)

Agreed: all you people out there scoffing should go out and take a couple of post-secondary business finance classes. Typically, with any widget in the most generic business model, the cost of goods and services (COGS) is roughly 50% of the final price, +/- a few points. You figure 40%-45% for overhead, which consists of indirect costs such as R&D, distribution, administration, marketing, legal, etc., and the rest is profit.

Producing a product isn't free. Who knew?

Re:And the other half... (1)

jmorris42 (1458) | more than 4 years ago | (#27679149)

> Is R&D, marketing, distribution, and profit.

I'd bet good money that isn't how it is accounted. The rest is an upfront prepaid wireless contract. They will book zero profit on the device, great for tax purposes. The money comes from the fact it is for all intents and purposes locked[1] to Amazon content which has nice phat margins.

Remember that the intended use is to buy all of the content over the wireless. To make that more desirable they even toss in some free wireless goodies. If the Kindle were just a typical e-book reader that loaded it's content via the USB port the battery life and weight specs would be much better. And it wouldn't need to waste so much space on the keyboard.

[1] I know some twit will pipe up and say you CAN load other content onto a Kindle but Amazon went out of their way to discourage it and made buying their content oh so easy.

Re:And the other half... (1)

Zerth (26112) | more than 4 years ago | (#27680283)

Call me a twit, but how do they discourge it? It shows up as a flash drive, you drop text files on it, tadah. The Ipod is more discouraging to put your own music on without itunes, unless you reflash it.

And if you wanted to use the search/annotation features, it'd still need a keyboard, unless you wanted to add a battery sucking touch film.

I would have bought one if they hadn't gotten rid of the SD slot.

Re:And the other half... (0)

Anonymous Coward | more than 4 years ago | (#27679391)

because profits are evil. don't you know that yet silly?

Re:And the other half... (0)

Anonymous Coward | more than 4 years ago | (#27679485)

Right. That's the difference between the BOM, and the e-BOM.

Re:And the other half... (4, Insightful)

rm999 (775449) | more than 4 years ago | (#27679985)

Every time there is a Slashdot article about a tear down with estimate hardware costs, tons of people point out that x% is an appropriate cost, etc. No one is saying otherwise; we can safely assume that Amazon understands the supply/demand curves, has researched the market, and plans on recouping its costs plus some profit - in other words, has priced the Kindle as optimally as it can. But this doesn't mean the tear-down exercise was pointless.

In my opinion, there is plenty of interesting information encoded in what the hardware costs. For one thing, it makes estimating marginal cost much easier, which is useful from a business perspective (if you can estimate manufacturing costs and sales, you can get a good idea of Amazon's revenue and costs - this is important if you are interested in investing in AMZN. Another interesting aspect is the relative cost of individual components. The high relative cost of the screen makes it clear that Amazon greatly values that aspect of the Kindle. We can expect to see further innovation in e-book screens, as competition will pay attention to this. Consumers should also be interested in information about Amazon's costs. If/when competition ramps up, I would expect prices to fall because of their healthy profit margin. And personally, as an electronics geek, I'm fascinated in how these types of devices are put together.

What is the cost to develop the software it runs? (1)

jholder (22001) | more than 4 years ago | (#27678243)

I assume the rest of the cost is R&D, software dev costs, and a little profit. Sounds about right for any company that doesn't want to go under.

Umm So? (1)

logicnazi (169418) | more than 4 years ago | (#27678255)

It's not like Amazon somehow magically doesn't have any overhead, shipping or design costs for the Kindle. They also have inventory costs, returned item costs and all the other gunk associated with manufacturing and selling an item.

Having merely a 50% of the cost (not including IP) for a still pioneering device like this seems totally reasonable.

Also, don't forget the wireless service... (5, Informative)

brainproxy (654715) | more than 4 years ago | (#27678375)

It's not like Amazon somehow magically doesn't have any overhead, shipping or design costs for the Kindle. They also have inventory costs, returned item costs and all the other gunk associated with manufacturing and selling an item.

Having merely a 50% of the cost (not including IP) for a still pioneering device like this seems totally reasonable.

Lets not also forget that Amazon pays not only for the bandwidth to deliver all that content, but also pays for the Wireless data service for EVERY unit out there, perpetually.

Re:Also, don't forget the wireless service... (1)

rolfwind (528248) | more than 4 years ago | (#27679237)

I bet the wireless coverage doesn't work on a per unit basis, it's either a set fee for amazon, % commission based on online sales, or based on data transferred for all the units.

I don't think Amazon would enter into a deal where they would end up paying for units that are either dead or just thrown in the corner not being used.

Re:Also, don't forget the wireless service... (0)

Anonymous Coward | more than 4 years ago | (#27679989)

You bet wrong. They pay a per unit cost for the service on a monthly basis for all actively provisioned devices.

Re:Also, don't forget the wireless service... (1)

blackest_k (761565) | more than 4 years ago | (#27679959)

Would I be mistaken in thinking Amazon gets paid each time data gets transfered?
It's hardly likely they are paying line rental in the deal.

How is this news? (5, Insightful)

stewbee (1019450) | more than 4 years ago | (#27678289)

Is it a surprise to any one that the manufacturing costs are not as much as retail? The article mentions cost to build, ie materials alone, is $185.49. I did not see mention of SW development, so to think that the rest is profit is just silly.

Really.. (2, Insightful)

Shivetya (243324) | more than 4 years ago | (#27678629)

when my friend worked for one of the major rental places they sold for over 300% cost and rented for far much more. In my industry we are easily double cost to our resellers whose prices are 150 to 250%. People always underestimate the true costs of running a business. For some reason too many think some things are just free. However it is the business behind the items that set much of the prices. All that time leading up to launch is accounted for as well as maintaining the business and aiming for other hopefully successful launches.

Now in truly super volume sales, usually renewable, the costs are far tighter but its volume they are pushing.

Re:Really.. (3, Interesting)

ausekilis (1513635) | more than 4 years ago | (#27678795)

I used to work in a shop that sold music equipment. The cost to the business would be approximately 1/2 to 1/3 of MSRP, so even a 45% off "sale" would still net the shop some decent profit. Funny part was, there were slower moving items (like guitars/keyboards/drums) that had MSRP around 200% of cost, and faster moving items (like strings, sticks, cables) that had MSRP around 250-300% or higher.

That's right, for a fast-moving item that cost us $1.50, MSRP would be $8, we'd advertise for $6. The best part? If I knew a customer and they were kind, they'd get them for more like $3. If the customer was a dick and asked for a discount, he'd get it for $5.50, oblivious that the dude in front of him paid half that.

In the case of the Kindle, Amazon is (presumably) the manufacturer as well as the distributor, so the margins can be different. I couldn't tell you exactly what the cost to actually *make* a guitar might be with respect to the distributor's cost, though we can see they're still in business so they must have another markup somewhere.

Re:Really.. (1)

stewbee (1019450) | more than 4 years ago | (#27678891)

Good point.

I was quite terse in my previous post, since I was just looking at the costs to develop the hardware. There are other costs as well (as others have already pointed out in this post as well in your reply) that are associated in running the business. Someones gotta pay the utility bill for example, so of course you make for that in the mark up of the product that you are selling.

compared to an Iphone (2, Interesting)

EZ Erik (855609) | more than 4 years ago | (#27678331)

Iphone has a higher markup percentage: http://www.crunchgear.com/2008/06/19/apple-only-spends-100-to-build-iphone-3g/ [crunchgear.com]

Re:compared to an Iphone (0)

Anonymous Coward | more than 4 years ago | (#27679291)

iAnything has a higher markup percentage.

Half seems like a lot (4, Insightful)

stokessd (89903) | more than 4 years ago | (#27678341)

For a lot of retail electronics, 10% of retail price is about the price of the raw parts. One half of the retail prices seems like pretty thin margins.

I was assuming that the kindle is much like a polaroid camera, or inkjet printer where the cost of the hardware is subsidized or sold at effectively no profit, and all the money is made in the consumables (the books).

Sheldon

Re:Half seems like a lot (1)

Overzeetop (214511) | more than 4 years ago | (#27678609)

Yeah, I didn't RTFA, but a lot of the early posts made it seem like they thought the parts should cost more. Quite the contrary, 50% - even if you include manufacturing costs - seems like a way to take a loss very easily. Most items have a 50% markup at the end stage of the chain, after all the devel, marketing, overhead, shipping, and production is included. Now, granted that the supply chain is short, and there will never (or nearly never) be a discount market for these, so the margin could be smaller and still make it. Still, with s/w development and support, this isn't going to make Bezos any richer from hardware sales.

Re:Half seems like a lot (1)

Dahamma (304068) | more than 4 years ago | (#27680083)

Most items have a 50% markup at the end stage of the chain

Remember, though, Amazon sells it direct on their web site, so it's a pretty short chain. If they sold through Best Buy, etc, they'd have to mark it up more to give the retailer, etc a profit, too.

Re:Half seems like a lot (0)

Anonymous Coward | more than 4 years ago | (#27679199)

You are forgetting the part where the Kindle comes with (limited) free cellular internet access for life.

Shocker! (0)

Anonymous Coward | more than 4 years ago | (#27678343)

Why, you could do all the electronics, circuit board layout, PCB manufacturing, case manufacturing, and software/UI all by yourself, make a home-made Kindle2, and save a bundle! Show those crooks some what-for!

Re:Shocker! (1)

nizo (81281) | more than 4 years ago | (#27678469)

Even better, make the components yourself; ultimately all they are is silicon (beach sand!), metal, and plastic. Hell just recycle the trash you find on the beach when you pickup a few bucketfuls of that sweet silicon goodness and you should be able to make your own kindle for a few pennies!

Re:Shocker! (4, Interesting)

Linker3000 (626634) | more than 4 years ago | (#27678569)

Back in the days of the C64 'me and the gang' looked at the cost of duplicating a commercial ROM cartridge copier plug-in board (for our own use - not to re-sell). I could do the the electronics, someone had the PCB making kit etc.. but when we added up all the raw costs, we were disappointed to find out it was cheaper to buy the item off the shelf!

So... (3, Insightful)

Xerolooper (1247258) | more than 4 years ago | (#27678409)

they are selling it at a loss. A device like this is usually sold as a loss leader as they intend to make up the lost revenue in the sale of the consumables(in this case the ebooks).

Re:So... (0, Informative)

Anonymous Coward | more than 4 years ago | (#27679749)

Dear crackhead moderators,
how the fuck did you reason when you thought this post should've been modded Insightful?

Let me quote from the fucking summary:

Kindle 2's manufacturing cost is almost half as much as its retail price

For those of you who aren't fucking retarded, it means the markup is roughly one hundred per cent.

Re:So... (1)

need4mospd (1146215) | more than 4 years ago | (#27679923)

For those of you who aren't fucking retarded, it means the markup is roughly one hundred per cent.

Those of us that are "fucking retarded" apparently understand that manufacturing costs don't make up the entire cost to produce the product. The products don't design, develop, and market themselves now do they?

Re:So... (0)

Anonymous Coward | more than 4 years ago | (#27680403)

Those of us based in THIS reality also realize that the R&D costs aren't all that great.
By August of last year, Amazon had sold almost a quarter of a million units. Despite being out of stock for five out of the nine months.

In other words, some 60000 units per month it was actually being sold.
60k * $180 = $10.8M, which without a doubt covers the R&D for the first version.

If you don't think $10M+ per month covers R&D, marketing and Jeff Bozo's coke deliveries, you're seriously delusional.

Ars called the Kindle "Amazon's license to print money", and not for no good reason.

Seems Like a Thin Margin (1)

Kozar_The_Malignant (738483) | more than 4 years ago | (#27678411)

I took the point to be that manufacturing costs of 50% of retail are fairly high. I suppose that when you are looking at a razor/razor blade marketing model that works out, but it seems quite a bit higher than other electronic gadgets.

Re:Seems Like a Thin Margin (1)

mapsjanhere (1130359) | more than 4 years ago | (#27678843)

This is not full manufacturing cost, this is outside material only. They probably barely break even (considering that there is no multi-level distribution chain adding more mark-ups in every step.

Sanity Check (0, Redundant)

mpapet (761907) | more than 4 years ago | (#27678431)

Where do they advertise to potential consumers?

Who are their customers?

By all appearances, they don't distribute it to other retailers. Most wouldn't carry it anyway.

Since Amazon is the only one carrying it, how does anyone know how many are sold?

I think the "news" actually is that they are trying to make a tiny bit of profit on a sale. Xboxes and the like are rumored to be break-even with profits coming from game titles sold.

Even pawn shops aren't so selfless (3, Insightful)

Aphoxema (1088507) | more than 4 years ago | (#27678437)

"... manufacturing cost is almost half as much as its retail price."

Wow, they're actually selling it pretty cheap then.

Re:Even pawn shops aren't so selfless (1)

jonesy16 (595988) | more than 4 years ago | (#27678555)

That's what I was thinking. In many retail businesses (clothing I know for sure), there is almost always a 100% markup over wholesale. Perform the same analysis on a Monster RCA cable and tell me what their margin is ...

Re:Even pawn shops aren't so selfless (1)

Fulcrum of Evil (560260) | more than 4 years ago | (#27678863)

Monster cables probably have a 90% margin, seeing as how a $50 cable costs $5 from monoprice.

Are these "investigations" done by teenagers? (1)

Junks Jerzey (54586) | more than 4 years ago | (#27678473)

There's clearly a lot more to the cost of a product than the raw materials. Look at, oh, any video game or application software.

Re:Are these "investigations" done by teenagers? (1)

XPeter (1429763) | more than 4 years ago | (#27678493)

I'm a teenager, you insensitive clod!

Other costs? (1)

mc1138 (718275) | more than 4 years ago | (#27678507)

What about costs that aren't inherent, such as defective units that have to be replaced for free, shipping costs on their end, R and D costs, that get transferred into cost, plus the fact that they have no real competitors to have a price war with. This isn't even including workers that will handle any of the various processes that the kindle touches from inception to shipping it out to consumers.

Seems like a reasonable markup (1)

gurps_npc (621217) | more than 4 years ago | (#27678509)

OK, so the components cost X and the total, assembled, transported to user, advertised, with retail markup version costs twice X. Seems totally normal to me. It's not like clothing, where the cost after complete assembly is 1/10th the cost at retail sale.

Sprint? (1)

escay (923320) | more than 4 years ago | (#27678543)

you are getting a lifetime wireless connectivity with Sprint. I don't see this factored into their material cost. amazon (and analysts) have often stated that the cost of connectivity is overlooked when people complain about the Kindle being pricey.

Link (0)

Anonymous Coward | more than 4 years ago | (#27678557)

Link to the actual article [businessweek.com]

Everything else goes to Sprint? :) (1)

saikou (211301) | more than 4 years ago | (#27678565)

Don't forget that CDMA network is not free. So, add to price of components one or two years of pre-paid data access. Which is probably cheap, but not free.

So cheap? (1)

insane_membrane (1366135) | more than 4 years ago | (#27678585)

Typical markup from manufacturer to retailer is 100%. From retailer to consumer is another 100-400%. At least this is true in the hi-fi stereo arena :)

Rules of Acquisition applied to Kindle 2 (1)

VulpesFoxnik (1493687) | more than 4 years ago | (#27678625)

Rule 141:
Only fools pay retail.

Rule 142:
Only fools sell wholesale.

Apparently... (4, Interesting)

brian0918 (638904) | more than 4 years ago | (#27678667)

Apparently, the folks at iSuppli subscribe to the socialist notion that the men of ideas are of no importance. Obviously, if you just take all the parts and throw them in a box, they'll magically form a Kindle.

This reminds me of a story from a WSJ article from 1974, about the nationalization of plants in Chile, quote in Ayn Rand's Philosophy: Who Needs It [50megs.com] :

Among them was Dow Chemical Company, which owned a plastics plant in Chile. Bob G. Caldwell, Dow's director of operations for South America, came with a technical team to inspect the remains of their plant. "'What we found was unbelievable to us,' he recalls, 'The plant was still operable, but in another six months we wouldn't have had a plant at all. They never checked anything.' ....Worse yet, the highly inflammable chemicals handled at the plant were in imminent danger of blowing up. 'Safety went to pot,' Mr. Caldwell says. 'The fire-sprinkler system was disconnected and the valves taken away for some other use outside. Then they were smoking in the most dangerous areas. They told us, "You didn't have any fires while you were here before, so it must not be as dangerous as you said."'"

Re:Apparently... (1)

MartinSchou (1360093) | more than 4 years ago | (#27679707)

the socialist notion that the men of ideas are of no importanceFirst of all, stop reading Ayn Rand as it's obviously giving you very very strange ideas about socialism. Various implementations of socialism (i.e. highly authoritarian ones), sure - but that's true of

Here's a fun fact for you:
Denmark, Finland, Norway and Sweden are all very socialist countries. High taxes, high level of social security (free school, education, health care etc), and they're all very keen on getting people educated in college (i.e. making men of ideas). They see their future as one that has interlectual companies outperforming regular industry.

In fact most of Europe would be seen as socialist by US standards. So lets compare university graduates in Europe to those of the US. I found this page while searching for "university graduates" per capita:

Education and Skills: [conferenceboard.ca]
Percentage of Graduates in Science, Math, Computer Science, and Engineering

Finland and Sweden rank 2nd and 4th on that list, Denmark and Norway are 14th and 15th and the US comes in at number 16 out of 17 countries compared.

Now, if these four heavily socialist countries are still managing to produce more graduates in these fields (percentage wise from the graduate population) AND they believe that "men of ideas are of no importance", why are they wasting all that money on those educations? Keep in mind, a college degree from a Scandinavian university is probably more expensive (higher taxes), but the state pays the tuition. Some of these countries even give the students money while they're in school (actual payments, not student loans).

Either they DO belive that "men of ideas are of no importance" but they're not socialist countries ... or you're completely and utterly mistaken about what makes a socialist a socialist.

Re:Apparently... (1)

trickyD1ck (1313117) | more than 4 years ago | (#27679895)

"giving you very very strange ideas about socialism" as if 100 million lives lost on the XX century were not enough. with the right version of socialism they'll surey get it right. hold on tight!

Re:Apparently... (1)

Bemopolis (698691) | more than 4 years ago | (#27680081)

And the United States, a self-confessed democracy over its existence, managed to kill at minimum one out of 50 of its own citizens in a civil war, eradicate a substantial fraction of its native population, forcibly import a substantial number of people for servile labor, imprison a large number of citizens based on coincident heritage of one combatant party during a mid-century war (but ignoring those of coincident heritage of other combatants), and expend a significant amount of post-war energies persecuting those who made the mistake of agreeing with the governing philosophy of a nation we had made an erstwhile ally of that conflict. (For sake of brevity, I shall halt this litany before entering the 1960s, before I have to use phrases like "Ellsberg" or "warrantless wiretaps".)

One might say that reflection on just these incidents might give one very strange ideas about democracy. Luckily you don't seem the type to suffer from inward analysis, being so busy judging other nations and all.

Re:Apparently... (1)

MartinSchou (1360093) | more than 4 years ago | (#27679839)

Well, aparently being openly socialist means the preview button changed its name to "Submit". Let's try it again with proper formatting:

the socialist notion that the men of ideas are of no importance

First of all, stop reading Ayn Rand as it's obviously giving you very very strange ideas about socialism. Various implementations of socialism (i.e. highly authoritarian ones), sure. But not socialism as an idea. No more than being an American makes you a fat, gun toting, inbred redneck who's never been outside the county he was born in, let alone country. It's true for some Americans, but it's not a general thing.

Here's a fun fact for you:
Denmark, Finland, Norway and Sweden are all very socialist countries. High taxes, high level of social security (free school, education, health care etc), and they're all very keen on getting people educated in college (i.e. making men of ideas). They see their future as one that has interlectual companies outperforming regular industry.

In fact most of Europe would be seen as socialist by US standards. So lets compare university graduates in Europe to those of the US. I found this page while searching for "university graduates" per capita:

Education and Skills: [conferenceboard.ca]
Percentage of Graduates in Science, Math, Computer Science, and Engineering

Finland and Sweden rank 2nd and 4th on that list, Denmark and Norway are 14th and 15th and the US comes in at number 16 out of 17 countries compared.

Now, if these four heavily socialist countries are still managing to produce more graduates in these fields (percentage wise from the graduate population) AND they believe that "men of ideas are of no importance", why are they wasting all that money on those educations? Keep in mind, a college degree from a Scandinavian university is probably more expensive (higher taxes), but the state pays the tuition. Some of these countries even give the students money while they're in school (actual payments, not student loans).

Either they DO belive that "men of ideas are of no importance" but they're not socialist countries ... or you're completely and utterly mistaken about what makes a socialist a socialist.

Re:Apparently... (1)

GryMor (88799) | more than 4 years ago | (#27680067)

I could be wrong, but I don't think Finland, Sweeden, Denmark and Norway have nationalized all their industries, so, they aren't socialist in the sense that GP was using the term.

Re:Apparently... (2, Insightful)

Xtifr (1323) | more than 4 years ago | (#27680309)

I could be wrong, but I don't think the US has clapped all of its workers in physical chains and forced them to work for no wages for their decadent overlords, so the US isn't a capitalist country in the sense that ol' Joe Stalin was using the word.

Re:Apparently... (1)

brian0918 (638904) | more than 4 years ago | (#27680307)

First of all, stop reading Ayn Rand as it's obviously giving you very very strange ideas about socialism.

Ad hominem. Try again.

Various implementations of socialism (i.e. highly authoritarian ones), sure. But not socialism as an idea.

The only variation is in the degree to which that fundamental notion is evaded or accepted.

Denmark, Finland, Norway and Sweden are all very socialist countries. High taxes, high level of social security (free school, education, health care etc), and they're all very keen on getting people educated in college (i.e. making men of ideas). They see their future as one that has interlectual companies outperforming regular industry.

Pay lip service to intellectuals is not the same as giving them the freedoms they need to achieve their goals and values. Neither their good intentions (wanting successful nationalized companies) nor their ends (actually having successful nationalized companies) justify the means (nationalization through the violation of individual rights).

They do believe a man with ideas are important in only one sense - in the sense that they are able to leech off him.

Re:Apparently... (1)

Eil (82413) | more than 4 years ago | (#27680509)

Hi.

I saw that you posted the same comment in the gearlog article, but I don't have an account there. I have an account here, however, so I'd like to clarify the point upon which all your shouting seems to rest:

Despite how you'd like to paint them, iSuppli is just a market research firm. They take things apart, document what's inside, and estimate the raw cost of the components. In particular, they made NO judgements about how much it cost Amazon's employees to engineer it, write the software, or market it. It's possible that they didn't even include many manufacturing costs (tooling the machinery, making the plastic moulds, etc). Even BusinessWeek's article was careful to point out that some costs, like royalty fees, were not figured into the research.

YOU were the one that manufactured the idea of, "hey, these Kindle things are really only worth $185! Somebody's getting ripped off!" Only so you could (try) to tear it down in a fit of anti-socialist rage.

Also, I'm still trying to figure out what a dilapidated chemical plant has to do with an internet story about an ebook reader.

what else is new in the world? (2, Interesting)

jollyreaper (513215) | more than 4 years ago | (#27678751)

This is usually the way of things. Wanna hazard a guess as to how much food costs at your favorite restaurant? I can guarantee your $12 entree didn't cost even half that much for them at the wholesaler. But the gross on that ain't anywhere near the net. If you want to talk about a contemptible outrage, you're talking about BS like components getting marked up 4x at the big box retailers. Yeah, you get the printer for cost and the $2 data cable for $20.

Who cares one crap about iSuppli? (3, Interesting)

g0at (135364) | more than 4 years ago | (#27678767)

Seriously, why does this company keep getting its name into headlines? Who gives a shit what they feel a bunch of components might cost? Come on, shills. This is a do-nothing company that pisses its pants for publicity, and places like the Mac rumors sites and Slashdot lap it up and parrot their squawkings.

It requires no more than a grade-school education to understand that the price to design, manufature, market, support and service a product is greater than the sum of the wholesale cost of its physical components.

Enough.

Take this stupid company with their silly name out back, shoot it, and don't mention it again.

Re:Who cares one crap about iSuppli? (3, Insightful)

MarkLR (236125) | more than 4 years ago | (#27679939)

It's somewhat useful in that you can say "suppose the screen was 1/2 the current price?" and get an estimate on what that could do to the retail price of the whole unit.

It also tells people don't expect an $100 or even $200 unit any without a change in the pricing model.

well that's me gobsmacked (1)

BlindRobin (768267) | more than 4 years ago | (#27678831)

Alert, trendy techflash with marginal utility and lots of fashion statement has excessive mark-up because the makers know tonnes of punters with more cash than will fork over. Stuff that matters... right

Re:well that's me gobsmacked (2, Insightful)

ScentCone (795499) | more than 4 years ago | (#27679055)

excessive mark-up

You should try designing, manufacturing, marketing, selling to individuals through a retail web presence, supporting, and perpetually providing the bandwidth for something sometime, and then rethink your term "excessive."

Costs not covered (1)

kimvette (919543) | more than 4 years ago | (#27679451)

Okay, so you have the raw material costs. What about:

* Maintenance (patches, upgrades, etc.)
* salaries - assembly, support, marketing, sales, quality assurance, and so forth
* Surplus for future R&D
* Surplus for warranty service
* Patent royalties (software patents are evil)
* affiliates' tiny slice of the pie

And your issue with the price is? (1)

hkb (777908) | more than 4 years ago | (#27679463)

Welcome to R&D-Ain't-Free-Istan, where R&D ain't free and companies need to recup their costs. Wait a while, the price will drop.

Cheap printers, expensive ink business model (1)

sehlat (180760) | more than 4 years ago | (#27679601)

Or to use an older metaphor, the razor is cheap, but the blades, aaah, the blades...

Amazon is clearly trying to sell the kindle for breakeven or lose-a-little and then more than make up any losses with ancillary sales of "kindle edition" ebooks. FYI, this strategy also seems to have worked pretty well for an obscure company, but I forget the name. It was Pear or Orange, or some kind of fruit, anyway.

Re:Cheap printers, expensive ink business model (1)

david_thornley (598059) | more than 4 years ago | (#27679757)

Nope; Apple went the other way with the iPod etc. They're not making much money on iTunes sales, but it makes people want to buy more iPods and iPhones, which is where they make their money. Since these things aren't indestructible, and Apple keeps coming out with improvements, they've got a nice revenue stream.

Either business model can work nicely, as Steve Jobs and any razor blade manufacturer will tell you. You do have to have something to profit on, which point some people seem to miss.

However, Amazon may be making money on the Kindles, given that they control the distribution chain completely. Nintendo made money on each Wii sold. In both cases, I bet the big money is in the aftermarket (eBooks and games).

Re:Cheap printers, expensive ink business model (1)

sehlat (180760) | more than 4 years ago | (#27679903)

I sit corrected. Thank you.

I would note, though, that it's likely to work better if you sell the hardware cheaply, because while Amazon charges about $10/ebook, each additional copy of the book costs them little more than pennies, and so provides a much better profit margin per sale.

Don't Forget Actual Market Forces (0)

Anonymous Coward | more than 4 years ago | (#27679763)

Suppliers sell products for as much as they can get. Even if the cost to bring the product to market is less than 0.01% (drug cartels), or more than 100% (sell stock at a loss). For whatever reason you may think justifies actual markup, the real reason is that they *can* charge that much.

meaning they have enough margin for direct sales (1)

swschrad (312009) | more than 4 years ago | (#27679845)

but no retail sales. ideally at every level of the distribution chain, you would like to get at least 50% to be able to maintain and grow the business.

if you're not keeping your margin, you are cutting either the future out, or starving the present.

so the Kindle is good ROI and that's why Amazon likes it and is lining up all the product they can to read with it.

if you sell a $30,000 product for $5000 less than the cost of making it, you are GM. this is not supposed to be a good thing.

get real (0)

Anonymous Coward | more than 4 years ago | (#27680113)

you didnt account for the other costs, legal, advertising, dev, etc. but even without these costs I would have to say so what? its a f'king free market u dont like it go move to china biatch

Loss leader (1)

spaceyhackerlady (462530) | more than 4 years ago | (#27680143)

It's a loss-leader. They sell it for a minimal (or zero) profit (don't forget manufacturing, R&D, support, etc.) and make money on the books they sell for it. They probably also make money on the publicity, when people realize how trendy Amazon are and buy even more books.

There is an element of "halo product" about Kindle as well. It generates interest and hype far beyond what just selling a little box with a screen will create.

Neither of these are new concepts.

...laura

how much??? (0)

Anonymous Coward | more than 4 years ago | (#27680391)

How much do they pay to license the digital restrictions management features? Those DRM-pushers all have a hidden agenda, and I'm sure they don't work for free.

Whispernet (1)

Nom du Keyboard (633989) | more than 4 years ago | (#27680505)

Some of the remaining price certainly has to go to pay for the Whispernet connection. Remember that there is a significant amount of free stuff you can d/l to your Kindle.
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