Ask Anyone But Amazon How Well the Kindle Is Selling

Expect lots of adjectives like “big,” “great,” “No. 1″ or “bestseller” to provide some color on how many Kindles Amazon is selling.

But don’t expect Amazon to crack open the books to provide anything more concrete than that, even during the company’s third-quarter earnings report, being released tomorrow.

The Seattle-based e-commerce giant has yet to provide numbers on how well its lineup of Kindles is selling, and that’s not likely to change.

For the most part, Amazon doesn’t share these figures because it doesn’t have to. Piper Jaffray Analyst Gene Munster points out that the Kindle is a fairly small part of Amazon’s business and, according to his best guess, makes up only about 4 percent of revenues.

And if Amazon doesn’t have to disclose sales, why would it want to? The numbers would only tip off Apple and Barnes & Noble on how well its tablet business is doing.

But expect Amazon to be under increasing pressure to start divulging more information as the Kindle makes a greater impact on its bottom line.

Analyst Mark Mahaney of Citi largely expects the third and fourth quarters to be strong; however, his guidance is lower compared to the Street consensus because of the financial hit the Kindle Fire launch could have on earnings.

“There is the distinct possibility that an aggressive/successful Fire launch could materially negatively impact AMZN’s margins and EPS near-term,” he wrote in a note to investors.

He expects a profit of 19 cents a share on revenues of $10.8 billion. The Street’s consensus is a profit of 24 cents a share on revenues of $10.9 billion.

As an indication of how well the full lineup of Kindle devices is selling, the top seven bestsellers in Amazon’s electronics store are Kindles of different shapes and sizes.

The Kindle Fire, which ships Nov. 15, is the most expensive and has been in the top slot for the past 27 days. The next best-selling Kindle is the cheapest model, at $79.

J.P. Morgan is estimating that in the fourth quarter, Amazon could sell five million Fires.

But all those sales may not be the best of news.

The Kindle Fire could result in lower earnings because of its aggressive price point. At just $199, it costs less than half of Apple’s entry-level iPad, which makes it appealing to the mass audience. But Amazon could be losing about $50 per Fire, according to some estimates.

However, the lower margin could be offset by the company’s new “offers” business, which basically places advertising on the devices to subsidize the cost of the hardware.

For example, the Kindle Touch with Special Offers costs only $99, but if you want one without ads, it costs $40 more. The new Kindle, without a touchscreen, costs $109 — or $79 for the ad-subsidized model. It’s not clear at this time if the Fire will ship with offers or not.

The offers appear on the device’s screensaver and do not appear while reading the text of a book or at any other time. They are sold by both Amazon and LivingSocial, which is second to Groupon in the deals niche and backed by Amazon.


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