But there is a Kindle apps for iPAD, I think people can still buy books from Amazon. I personally don't think this is a very nice idea to invest on developing another hardware that more or less is just a colorful ebook reader.
I don't think Amazon's play here has anything to do with making money on the Kindle Fire tablet. It appears that the company has set things up so that it will break even on the sales, maybe make a couple of bucks. But the real motivation here is that Amazon saw what was happening with Apple and feared that as more people got their hands on iPads they would buy more books, music, apps, etc. from Apple. Amazon needed to get into customers' and potential customers' hands a device that would increase the chances that they would buy media directly from Amazon. You can say what you want about the design--I'm sure it's not as elegant as the iPad--but it's a brilliant move because the cost--less than half of an entry level iPad--will entice many a buyer and Amazon will at the very least put a speed bump in iPad's momentum.
If the BOM cost is ~$143, incluing the overheads, the manufacturing cost of this product could be any where between $160 to $180. Looks like Amazon is selling it at a very low profit margin, betting on the volume?