TechInsights, a division of United Business Media, has completed a 'teardown' analysis of Microsoft's motion-gaming Kinect device and estimates that the material cost of the device is around $56.00 USD.

The image processor, image sensors, and microphones, supplied by Israeli company PrimeSense, were found to be the most expensive components - accounting for 30% of the total material costs. Interestingly, TechInsights also found that the Kinect does in fact contain a standalone processor. This component was often rumoured to have been removed in order to save on production costs, and indeed Microsoft's Kudo Tsunoda recently claimed to CVG that "there's just no need to have that extra processor."

http://www.incgamers.com/News/25935/the-estimated-material-cost-of-kinect-56-usd

Its good that it is profitable but it also means that there might be a good price drop next year. I guess the reason they are charging $150 is to make some of the money back they are using on marketing.  Reminds me apple a little- It cost $200 to make an ipad but they sell it at $500.

if that is real then MS will make almost all of $500 million they are spending on marketing

The processor was an integral part of Kinect from day one, nobody ever said it isn't in there or would be removed. The EXTRA processor (image manipulation in hardware) was removed as the GPU can do that part.

You expected them to sell it at cost price or less?

Microsoft confirmed they had definitely removed the processor so whatever that processor is remains to be seen.

Some webcams already have some kind of processor for CCD imaging and such so could be that.

I agree with you that $150.00 is a good starting price as it gives plenty of room for price cuts if sales are not quite as expected or simply to boost the sales.

MS itself said they removed it

this processor must be something smaller

Which part of this sentence didn't you understand:

The EXTRA processor (image manipulation in hardware) was removed

Hint : there is a word in that sentence that yells at you.

Seriously, folks, Kinect does not work without the PrimeSense processor to gather audio data, send data to the XBox and the key part: create the depth field  - which is quite a convoluted thing to do (apparently it takes approx. 2 frames for the processor to do all that).

sorry for not reading it carefully

Though with assemblycosts, shippingcosts, store margin and taxes the total will go up to around $100 , so Microsoft will probably only be making $50 tops. And that's not counting in the bundled game.

With the $500 million marketing budget, it's a good thing that other software titles seem to be selling fairly good aswell.

They'll have R&D costs to cover also.  As well as the software that's bundled, and packaging costs.