Amazon is losing $5 on each $79 Kindle sold
According to an iSupply teardown, the Kindle 2011 costs $84 to make - which means that Amazon is actually losing $5 on each ad-supported device sold - which cost $79. The $84 is the cost of materials and assembly - it does not include royaly/license fees and shipping costs. Obviously Amazon is hoping to make money from ad revenue and from book/software sales.
The most expensive component in the Kindle is the 6" E Ink display module - which costs $30.5 according to iSupply.