New interest in an Amazon smartphone

Is a slick new phone a natural follow-up to the success of the Kindle Fire?

By Trefis Feb 22, 2012 3:42PM
Image: young woman reading from Kindle (© Reggie Casagrande/Photographer)The face-off between Amazon (AMZN) and Apple (AAPL) is already expanding beyond tablets, and some customers want smartphones to be the next battleground.

Amazon made a sparkling tablet debut with the Kindle Fire, generating interest in the possibility of an Amazon smartphone (though the company has not confirmed plans in this area). A recent survey by Baird Equity found that a smartphone made by Amazon drew 40% interest, while customers were largely uninterested (12% interested) in a long-rumored phone from Facebook.

A possible foray by Amazon into the smartphone market may pose a risk to established players like Apple, but even more so to Google's (GOOG) Android.

A key downside for Android


Google's open Android system may be the most widely used mobile platform, but its ecosystem is getting fragmented by the day. In a bid to differentiate themselves from others using the same Android software, smartphone vendors have been adding their own flavor to the bare-bones Android structure.


Amazon is no different. It used only the basic essentials of Google's platform in its recently launched tablet, which has otherwise been customized to drive media consumption. Its smartphone offering, if confirmed, will likely also sport a variant of the Android software. As Amazon develops new upgrades for its smartphone and tablet, it will continue to take Android down a different road, forcing developers to choose between the Android and Kindle operating systems.


Additionally, the Kindle Fire doesn't use Google's Android Market, instead offering the Amazon Appstore 2.0. At some point in the future, Amazon's mobile devices might pose a threat to others running the very operating system it had once drawn its identity from.


Amazon Kindle Units Sold


Low-cost strategy works


Amazon will most likely follow the same low-cost strategy with its smartphone that it's using for the Kindle Fire. A typical smartphone costs anywhere between $150 and $200 to manufacture, but carriers tend to subsidize the price in return for pulling subscribers into a long-term contract.


Amazon could price its smartphone close to its manufacturing cost, freeing up the device for those who do not want to be bound by a postpaid carrier contract. And carriers could further decrease the price with their traditional contract offers, making it even more attractive. A $150-$250 subsidy for a carrier is not as much a drain compared with the iPhone's huge subsidy bill of around $450.


Moreover, an Amazon smartphone offering is more likely to be attuned to carrier needs of data consumption, as Amazon itself relies on the same to earn its money back.


IPhone prices may soon be gone


The smartphone market is not new, unlike the nascent tablet industry, presenting a major risk to Apple. The Kindle Fire's launch had hardly any impact on iPad sales, but the addition of another low-priced smartphone to the Android stable could dent iPhone sales. The iPhone's immense popularity has so far helped Apple maintain its premium prices. But as new competitors such as Amazon enter the arena, smartphones could increasingly be commoditized, and it will be tough for Apple to continue to charge high prices without losing market share.


Apple iPhone Pricing

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

112
112 rated 1
288
288 rated 2
479
479 rated 3
645
645 rated 4
644
644 rated 5
653
653 rated 6
638
638 rated 7
483
483 rated 8
288
288 rated 9
123
123 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.