Well, this is a strange twist of events! The Nexus 7 has been called by many reviewers already the “Kindle Fire killer”, because there's no reason why anyone would want the Kindle Fire over a much higher quality and much higher performance Nexus 7. That's even more true if you're an Android user, who is best served by having the latest software straight from Google, instead of a heavily customized older version of Android. And yet, an Amazon spokesperson told TechRadar: “People higher up in Amazon are talking to Google regarding the Nexus 7.”
This move may seem even stranger considering that Amazon is about to launch the next-gen Kindle Fire 2, and one would think it may want to use all the advantages it's got over Google, like a superior distribution system in the U.S., to push the Fire sales. So then, why would Amazon help Google sell more Nexus 7 units?
In the past, Amazon's relationship with Google hasn't been so bad, and I think it even got stronger when Amazon decided it needed a big platform alternative to Apple's iOS. So Amazon may be still thinking the same thing right now – that it'd rather be allies with Google against Apple – instead of being a rival for both.
Plus, I believe Amazon still wants to be as platform-agnostic as possible - the company is also selling various iPad and iPhone models. Let's try to think from the company's point of view for a moment. Why did it build the original Kindle, and then the money-losing Kindle Fire (as far as hardware goes)? Because Amazon wants to push its content to as many people as possible and it makes sense for the Kindle maker to also build its own hardware in order to achieve that.
Amazon is not interested in making money only from hardware sales, but also from content from its digital stores. If Amazon can make money on the Nexus 7 just like on any other product, especially if the Nexus 7 turns out to be very popular, and it's still compatible with the company's vision of pushing content to as many devices as possible, then why not sell the Nexus 7 as well?