Amazon drops Kindle 2 price

People who have held off buying a Kindle often cite the electronic reader's hefty price tag. Now Amazon is cutting the price of its Kindle 2 reader from $359 to $299. Will the price cut spur demand? Selling Kindle 2 for under $300 may convince some people to take the plunge, but others may hold out for deeper discounts.

Amazon is currently devoting the top of its home page to the new Kindle 2 pricing. The company has been secretive about Kindle sales (CEO Jeff Bezos has said Amazon may never share that data) so it's not clear how many devices are out there and how much revenue the company is making from them.

Amazon launched the Kindle 2 in February of this year. Its cousin, the large-screen Kindle DX, came out in early June, and right now is out of stock, with a 3 to 5 week wait for new shipments. Perhaps Amazon is trying to nudge people toward Kindle 2 with a price cut, to keep demand flowing while the DX is sold out. The DX, for the moment, maintains its $489 price tag.

Update: Citigroup analyst Mark Mahaney weighed in on Kindle 2's new pricing, writing in a research note: "We have long viewed a price cut as a prerequisite to more broad consumer adoption of the Kindle (consistent with other major electronics price reductions like the iPod)."

Mahaney added that his earlier estimate of $1.2 billion in Kindle sales by 2010 is unchanged because he had "already baked in this level of price cut" into his calculations.

Update: And what about people who bought a Kindle for $359, just before Amazon slashed the price? One reader wrote in the comments below that he emailed Amazon customer care, which offered to give him a $60 refund. I've asked Amazon if this is the official policy.

Update: Amazon spokesman Drew Herdener tells me it is Amazon's official policy that if people bought a Kindle 2 within 30 days of the price drop, they can get the $60 refund.

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About Eric Engleman

ERIC ENGLEMAN is senior technology staff writer for TechFlash and the Puget Sound Business Journal, covering online retail giant Amazon.com. Engleman tracks Amazon's increasingly complex business, spanning ecommerce, Kindle, cloud computing, and more. He's been covering technology and other industries for the Business Journal since 2003.

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