Since Amazon.com’s (AMZN) foray into the tablet-computer market with the Kindle Fire in 2011, investors have eagerly awaited the online retailer’s entry into the highly competitive smartphone market. This sector has been dominated since its inception by tech moguls Apple (AAPL) and Samsung, but now it appears as though Amazon is gearing up to join the fray with a device of its own. The move, which the investment community highly anticipates will come in 2013, would have considerable implications not only for Amazon, but for the wireless industry as a whole.
With its Kindle line, Amazon has focused on using low price points to draw consumers to its devices, and then benefitted from the sale of content and services on its products post-purchase. Keeping with this strategy would allow the Internet retail giant to effectively market a smartphone that is attractively priced relative to the competition, putting pressure on Apple’s iPhone and Samsung devices running on Google’s (GOOG) Android platform. In addition, Amazon’s Kindle offers unorthodox data options, compared with other devices, which could further impact the pricing structure of the smartphone market if the company continues with this approach. For example, with Amazon’s Kindle Fire customers have the option of purchasing a 12-month data plan, versus the typical month-to-month offerings of other device makers. A similar move with its smartphone could be quite disruptive to the way data plans are offered across the smartphone market.
According to reports, Amazon has enlisted Foxconn, which also manufactures the Apple iPhone, to manufacture its first smartphone for release in the second half of this year. There is still no word on which operating system the company will opt for, but Google’s Android platform and Microsoft’s (MSFT – Free Microsoft Stock Report) Windows 8 would be likely contenders. The price tag for the device is rumored to be in the $100-$200 range, a competitive entry point given what other smartphone makers are currently offering. Indeed, the cheapest iPhone 5 starts at $199 when purchased with a wireless service plan (it costs $649 without). In all, it appears as though Amazon’s entry into the smartphone sector has the potential to not only increase competition, but change the dynamics of the industry, as well.
Indeed, with the advent of an Amazon smartphone, consumers may not only have more options when it comes to devices, but also more choices related to how they pay for data and content. And, provided the company can continue to benefit from the sale of its services through these devices, as opposed to the hardware itself, it should be in line to realize considerable gains. Though it is difficult to quantify the exact impact the launch of a smartphone would have on Amazon’s performance, it is safe to say that it would mark yet another step forward for the online retailer in its attempts to compete in the mobile device sector. And given its well-received launch into the tablet-computer market with its Kindle Fire, the company appears poised to make a successful push into the smartphone arena.
At the time of this article’s writing, the author did not have any positions in any of the companies mentioned.