Amazon Loses $5 on Every $79 Kindle It Sells, Analyst Says

That last part is certainly a stretch, but according to a new report by IHS iSuppli, it costs Amazon $84 to make every basic Kindle it sells for $79.

Amazon founder Jeff Bezos is no dummy, of course, and the company is banking on things like the advertising revenue gained from the small ads that appear along the bottom of the screen of the cheaper Kindle to make up for the lost capital.

Also, the Kindle allows users to buy books, apps, music, etc. on it. So simply putting the device in people's hands creates enough revue-making opportunities that the company sees the $5 loss as acceptable.

Compare that with another local technology giant--Nintendo--and there's a stark difference.

Nintendo recently lowered the price of its 3DS portable gaming system from $250 to $179, even though analysts (the same ones who analyzed the Kindle costs) say it costs about $190 to make and supply gaming outlets with the device.

The 3DS, however, does not include the kind of instant online shopping opportunities that the Kindle does. 3DS users can download a select amount of games, NetFlix movies and a few other oddities, but Amazon's ability to squeeze cash out of its Kindle users is far superior to Nintendo's.

So yes, Amazon is taking a loss for every $79 Kindle is sells. But chances are good that you'll give the company the difference and then some before long.