Is a Smartphone in Amazon’s Future?

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The first mention of this idea came late last year, when Citigroup Research Analyst Kevin Chang wrote a research note saying he believes there would be an Amazon Smartphone by the fourth quarter of this year.

AmazonWired News picked up on the notion again earlier this month, with a comment from ABI Research analyst Aapo Markkanen, who called it a “logical next step” for the retail giant.

But The Yankee Group followed that up with a blog post that seemed to agree with the idea. The posting noted that Kindle Fire consumers don’t tend to take the Fire everywhere they go. Instead, they use it largely at home with a Wi-Fi connection. “To truly make a splash in the mobile space, they say, the next logical step is an Amazon-branded smartphone,” said the blog post.

Content Is King

However, Wally Swain senior vice president of research for Yankee Group, added “Amazon’s business is selling media not devices — unlike Samsung and to some extent Apple. I see no reason why Amazon needs to develop a smartphone, which will have a limited or at least lower impact on its primary business: selling media.”

Amazon did not respond to requests for comment.

An Amazon smartphone integrated with Amazon’s storefront would be the razor to help the company sell its blades – namely, content. Kindle Fire sells e-books, music and software, but as Yankee Group noted, it stays home while people take a smartphone out with them.

Swain added he doubted it would have a significant impact on iPhone. “The best reason to do it would be to learn something about the challenges of moving to a smaller format and incorporating the stuff needed to do voice and SMS. But since an Amazon smartphone has been rumored for years presumably they have learned all they have to (or are going to) learn,” he wrote.

In his report, Mahaney said that the Amazon phone could be built for somewhere between $150 and $170, and that Amazon would sell it at cost. The Kindle Fire is sold for virtually no profit as well, well below Apple’s price for the iPad.

Android Inside

And it would likely be an Android. Swain said in an email that the only reason to go with Windows Phone 7 or 8, the latter of which is due later this year, would be for its own education, and there is downside to that.

“They have a lot invested in Android with the Fire. If they feel compelled to do a smartphone, it would be a significant compounding of already high risk to switch platforms and do it in WP7,” he said.

Swain said he’s heard rumors of an ‘Amazon phone’ so many times over the past few years that he doesn’t put much stock in the idea. “I put it less than 50 percent, but I’ll hedge my bets against the insanity of corporate decision-making and the chance that the original author had something more than idle speculation to go on by not being more specific,” he said.

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