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Halftime: Is a Free Amazon Kindle on the Horizon?

On Tuesday, Amazon.com announced it has dropped the price on its Kindle e-reader. The new Kindle with Special Offers will cost $114 — $25 less than the currently lowest-priced Kindle — and include advertisements on the bottom of the device's home page and on its screen savers.

When it comes to e-readers, though, price isn't the point, ThinkEquity analyst Aaron Kessler said. It's more about e-book sales, he explained. After all, digital book sales is what's really bringing in the money for Amazon and not necessarily the devices themselves. He likened it to the razors and the razor blades model, a business tactic where one good is sold at a discount while the second dependent good is sold at a considerably higher price.

"I think originally, Amazon's plan was to sell the Kindle, I mean obviously, it was a much higher price point and it was less about the books," Kessler said. "I think it's now switched the razor blades model, where they're likely almost giving the Kindle away for free, potentially at even a small loss and looking to make that back with volume on the books."

Amazon already has two-thirds of the e-book market, Kessler said. He thinks that will only continue to grow.

Options trader Jon Najarian said he's surprised anyone thinks a $25 drop in Kindle pricing would help boost sales. The optionMONSTER.com co-founder doesn't think many people would want to endure ads only to save $25 on the device. Kessler thinks sales will continue as the Kindle is offered for lower and lower prices. Should the device fall below the $100 level, Kessler said sales will really take off.

"There's been some rumors that they may even offer it for free even with Prime members," Kessler said. "I think we're heading for sub-$100 price points for e-readers."

Author Stephen Weiss thinks the online retailer will eventually have to give the Kindle away because it will become hard to offer both a tablet and e-reader. After all, the devices are similar. Giving the device away for free will hurt margins, though.

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Trader disclosure: On April 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (JPM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (TCK); Terranova owns (BAX); Terranova owns (XOM); Terranova owns (AKAM); Weiss owns (COP); Weiss owns (MSFT); Weiss owns (DVN); Weiss owns (HK); Weiss owns (BTU); Weiss owns (EMC); Weiss owns (JPM); Weiss owns (FAS); Weiss owns (HBAN); Weiss is short (IWM); Weiss is short (X); Weiss owns (RTH); Weiss owns (AKS)

For Dan Dicker
Dicker Owns (COP)
Dicker Owns (XOM)
Dicker Owns (APA)
Dicker Has A Long Position In Oil Through Spreads And Options

For Aaron Kessler
ThinkEquity, LLC Is A Market Maker In (AMZN)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
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Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & IRL
PLC

For Brian Kelly
Accounts Managed by Kanundrum Capital are long (MON)
Accounts Managed by Kanundrum Capital are long (SLV)
Accounts Managed by Kanundrum Capital are long (GLD)
Accounts Managed by Kanundrum Capital are long (EBAY)
Accounts Managed by Kanundrum Capital are long (EWP)
Accounts Managed by Kanundrum Capital are long (TSN)
Accounts Managed by Kanundrum Capital are long (VLO)
Accounts Managed by Kanundrum Capital are long VIX calls
Accounts Managed by Kanundrum Capital are long SPY puts
Accounts Managed by Kanundrum Capital are long wheat futures
Accounts Managed by Kanundrum Capital are long soy futures
Accounts Managed by Kanundrum Capital are long gold futures
Accounts Managed by Kanundrum Capital are short (SMH)
Accounts Managed by Kanundrum Capital are short (XLF)
Accounts Managed by Kanundrum Capital are short US bond futures

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