Is a Kindle Smartphone a Smart Move?
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Not too long ago the tech world was abuzz with speculation that Facebook (NASDAQ: FB) was planning on launching its own smartphone. With over half of Facebook’s usage now coming from mobile users, Facebook doesn’t have any way of making money from this mobile usage. At the moment Facebook doesn’t have any ads on its mobile apps and there have been complaints that Facebook doesn’t have a unified experience across mobile platforms. The case for a Facebook smartphone is that it would be a way for Facebook to assert itself in the mobile world and start profiting from mobile usage. The latest speculation in Bloomberg from the mobile tech world is not about Facebook launching a smartphone but Amazon (NASDAQ: AMZN) launching one.
Amazon has been in the consumer hardware market since the first Kindle E-reader launched in 2007 for $399. In early 2011 Amazon launched their own app store for Android based mobile applications and this as expected was followed by an Android tablet, the Kindle Fire. With a price of $199 and running a modified version of Android with Amazon’s services replacing Google’s, the Fire initially caught on. Compared to the so-so other Android tablets and the $500 iPad the Fire sold millions of units and was at one point the bestselling tablet other than the iPad. However the Fire’s sales have fizzled somewhat shipping only 700,000 units in the latest quarter.
Additionally Google (NASDAQ: GOOG) announced and will soon be shipping their $199 Android tablet, the Nexus 7. The Nexus 7 will feature a quad core processor and a 12 core graphics processor as well as a camera. It will also run a stock version of Android directly supported by Google. On top of all of this you get a $25 credit to the Google Play store when you purchase a Nexus 7. The Nexus 7 will be one of the first devices running Android 4.1 Jelly Bean, and will get quick future updates because it is directly supported by Google.
The addition of an Amazon built smartphone could be what the Kindle family needs to get their sales back. Amazon could build a platform of devices, E-Readers, tablets and smartphones running their digital suite of services and products. Thus far the Amazon TV, Movie, Music, books, cloud storage as well as other content services are better than those offered by Google.
An Amazon smartphone would not be a huge threat to the iPhone, at least not in the short term. Where an Amazon phone could pose a competitive threat is to the rest of the Android ecosystem. Amazon’s ability to simplify and unify Android into a set of intuitive devices under the Kindle brand combined with their loyal user base could give an Amazon phone the foothold it needs. However it would always remain a subset of Android.
Amazon faces stiff competition from every side should they launch a phone. With Jelly Bean launching from Google this month and the Nexus 7 Android is posing more of a threat to Fire sales. Of course since the Kindle Fire is based on Android 2.3 and a Kindle phone would also be based on Android, Amazon needs Google to keep innovating and building a better operating system. At the same time if Google makes its own hardware to run its new better operating system as they are with the Nexus 7, their innovation becomes a detriment to Amazon.
Amazon could be willing to sell their phone at no profit, as they do with the Kindle Fire, at least initially. Something that other smartphone makers are not willing to do, which could give Amazon an edge. Amazon will make its money from sales of its digital content and not from the initial sale of the phone. Hardware makers like HTC, Nokia and Samsung have to make their money from the hardware sales.
Amazon has another potential source of traction with the Windows Phone market. Windows Phone 8 announced by Microsoft (NASDAQ: MSFT) last month will not be able to run on any existing Windows Phone, this may be enough for current Windows Phone users to try another platform. RIMM's fall and recently announced delay of the BlackBerry 10 operating system until 2013 could also give an Amazon smartphone a leg up.
With several years of hardware experience under their belt, a full line of digital services and a somewhat popular tablet, it is not out of the realm of possibility that Amazon is prepping a smartphone. Tough competition from Android, which the Kindle phone will be related to as well as from the iPhone, Windows Phone and others will keep at least the first generation of an Amazon Phone from being a success.
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