Amazon's pockets, but that could be by design.
Don't the razor manufacturers give away razors with abandon? They'll take the loss on that part of the shaving device, knowing that they'll get you when you go out to buy blades. Profits come from the paraphernalia, not the device itself.
So too does the Kindle sell at cost or a near loss, with Jeff Bezos figuring on the buyer purchasing lots of books from Amazon to load onto the device. Profit in the paraphernalia, not the device itself.
Apple's iPad has been an enormous seller, a small computer that does more than display words of a book onto its screen.
If you were looking to buy something to read on, you might consider an iPad because it does more than a Kindle. What if you have a sudden urge to surf the net? Link to your iPod?Can't do that with a Kindle.
Price is the hurdle.
Kindles are cheap. iPads are expensive. If your budget is tight, you might want an iPad more than a Kindle but if the money isn't there, you settle.
Never a company to miss an opportunity to make money, Apple is planning to release a smaller version of the iPad to compete with Kindle.
If it can compete on price, Apple will win.
The company has a certain cache, with its lovely Apple stores and its many products that all interact so easily and beautifully.
Kindle is downright clunky by comparison, the old family sedan going up against a sleek Jaguar.
Amazon has their ebook format, and you can only buy from Amazon. Apple has iBooks, part of their iTunes division, and you can buy ebooks to download onto your iPad on Smashwords. Authors get a better deal there as well.
So where does Amazon go, to head off the Apple assault? The Kindle is a loss leader. Can they sell it for even more below cost and still keep at it, or will Apple do to Kindle what it did to the Sony Walkman?