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Google Nexus 7 selling at a loss at £159, teardown suggests

The cheaper 8GB version of Google's new tablet is a loss leader for the search giant, according to a new teardown report.

Google's first tablet, the Jelly Bean-sporting Nexus 7, seems such a jaw-dropping bargain that many people have been wondering how the search behemoth can flog it for £159 without losing any money. The answer? It's not.

Parts alone add up to about £118 for the 8GB model, according to a teardown by UBM TechInsights that's been priced up by Fudzilla. That leaves about £40 to play with. After Google has paid for support, marketing, VAT (over £25) and the delightful £15 Google Play voucher included in the pack, that's one hell of a loss when pre-sales have been "big", according to Android's director of product management, Hugo Barra, who refused to divulge any figures.

The 16GB model, which sells at £199, should produce a small profit, because the extra flash memory hardly adds anything at all to the bill from manufacturer Asus. But because there's no expandable memory slot, that extra storage could be a wise investment.

Andy Rubin, senior vice president at Google, has already stated the company has no interest in profiting from sales of the tablet, which means the goal is to grab iPad refuseniks with the minuscule price, and make a profit in the long term by renting movies and selling apps and music through the Google Play market, as well as the rest of Google's services.

The Nexus 7 was announced in late June with a bevy of exciting features, such as the new Jelly Bean update, Google Now, a 1,280x800-pixel display, a Tegra 3 processor, and an obvious desire to kick the stuffing out of Amazon's dirt-cheap Kindle Fire.

Amazon is apparently preparing a new Kindle tablet, but it'll have to do something impressive to bring the Nexus to its knees. The device will reportedly sport a similar 1,280x800-pixel screen, a rear camera and a bump up from the Fire's basic processor and graphics performance. There's still no word on when the UK will get Fired up.

Are you interested in buying a Nexus 7 or are you waiting for a refresh to the Kindle line-up? If so, what sets it aside for you from the rest of the market? Let us know in the comments or on our Facebook page.

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Image credit: iFixit