Google expects modest profit on Nexus 7
The search company is spending big money to manufacture its tablet.
Google (GOOG) will reportedly earn a small profit on the standard $199 Nexus 7 tablet.
MarketWatch reports that the manufacturing costs alone for each device come in at $152. That leaves a profit of $47, but does not include other costs, like marketing or distributing. IHS, which analyzed the seven-inch tablet, estimates that Google's expenses are $18 higher than what Amazon (AMZN) now spends on manufacturing the Kindle Fire.
However, when the Kindle Fire was first released, IHS estimated that the company spent as much as $191.65 to build it. Other reports suggested that Amazon spent over $200 to manufacture the device, incurring losses that ranged from $1.70 to as much as $49.
Analysts believe that if Amazon was taking a loss, it did so with the hope of profiting from the sale of content, including annual subscriptions to its premium service, Amazon Prime. Similar to Netflix (NFLX) and Hulu, Amazon Prime is a streaming video service that allows its users to view thousands of films and TV shows from a multitude of devices. But whereas Netflix and Hulu are exclusive to video viewing, Amazon Prime also provides its users with a number of other benefits, such as free standard shipping and discounted two-day shipping for Amazon shoppers.
Amazon is expected to bridge the gap between the original Kindle Fire and the third-generation iPad by building multiple versions of the next-generation Kindle Fire. One report suggests that there could be as many as four new tablets from Amazon, including one that features a high-resolution screen, and another that adds 4G connectivity to the mix. There are even reports that Amazon could release a larger tablet of some kind, though it is not expected to release a device as large as Apple's (AAPL) standard iPad.
Apple is expected to invade Amazon's territory by releasing its first seven-inch tablet, the presumably titled iPad Mini. Rumored to have a high-end IGZO display and a thinner body than the standard iPad, the iPad Mini will reportedly go into production this fall in preparation for a November release.
Many analysts believe that by releasing an iPad Mini, Apple will simultaneously expand its share of the tablet market while cannibalizing some sales of the third-generation iPad. Rumored to be priced at $299, the iPad Mini would cost more than the iPod Touch but retail for less than the iPad 2, which currently sells for $399.
At $299, the iPad Mini would also cost more than the existing Kindle Fire and the standard Nexus 7. This could make it difficult for Apple to compete in the seven-inch market, which tends to cater to cost-sensitive consumers.
More from Benzinga
- Bank of Korea, Central Bank of Brazil Cut Rates
- SAP Acquisitions Pay Off with Record Results
- No QE Just Yet, Fed Minutes Suggest
Copyright © 2014 Microsoft. All rights reserved.
The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.