Its recent attempt to ease the bleeding of its wounds was - pun intended - to cut its price. The Kindle's lesser-version had its price slashed significantly, though its fancier model remained the same. This meant it was still within the ring of competition that Apple's iPad is reigning over. So did they make massive upgrades to the Kindle to make it as capable as the iPad?
No: they made the iPad better instead.
The Kindle has a black-and-white screen with no audio or video capabilities. The iPad, contrastingly, has a richly vibrant colour screen, and both audio and video capabilities. For the Kindle to legitimately take on the iPad within the demographic of wealthy e-reader consumers, it would need to sport some major hardware improvements. But Amazon didn't see this is financially or logistically viable, and instead opted for a sneakier route.
Kindle e-book titles that have audio versions or include video clips can now be experienced in all their intended glory via the iPad - but only using Amazon's app (also usable on the iPhone and iPod Touch). This encourages users to buy e-books from Amazon, and not from iPad's iBookstore, and also allows Kindle titles to include audio and video and not have those added features go to waste on an incapable Kindle device.
For now, the library of titles with these features ready to roll on Apple devices is slim, and the video features are fairly limited. But with the hardware now supplied by another company, e-book makers and publishers who source through Amazon know they can do more, and probably will.
At worst, it will keep the Amazon's Kindle e-books relevant while they decide to either upgrade the Kindle, or drop price points further.