July 9, 2009

Amazon cuts Kindle 2 price $60 to $299

Amazon.com Inc. has cut the price of its Kindle 2 e-book reader to $299, a $60 drop, the U.S. company says.

The company is passing on savings to consumers from the increasing volume of Kindle 2 sales and the decreasing costs to make the digital reading device, spokesman Andrew Herdener said in a statement.

Amazon's jumbo Kindle DX, introduced in May, remains $489. It is out of stock on the site and expected to ship in three to five weeks.

The price reduction for the Kindle 2 also appears to be related to the acquisition of the maker of the Kindle's electronic paper displays by the Kindle assembler, a Goldman Sachs analyst said.

The $215 million June acquisition of E Ink Corp. by Prime View International Co. may have aligned Amazon's and Prime View's interests in favor of price cuts to drive volume, analyst James Mitchell said.

A ZDNet.com editor said the Kindle 2 price tag is still too high, but breaking the $300 mark should drive more purchases.

Sandeep Aggarwal, an Internet research analyst at the Collins Stewart PLC financial advisory group, estimated the Kindle would generate $310 million in revenue and $70 million in profit this year for Amazon and rise to $2 billion in revenue and $560 million in profit by 2012.

Citigroup Inc. analyst Mark Mahaney wrote he expected Kindle-related income to reach $1.2 billion next year, or 5 percent of Amazon's overall revenue.

Amazon makes more than 300,000 books available for the Kindle, up from 90,000 when the device was introduced in late 2007, The New York Times reported.

Amazon also recently filed a patent application discussing ways of embedding advertisements in its digital books.