Bezos should know that "The Art of War" would recommend using events such as these to Amazon's benefit. If nothing else these rumors may serve to delay any phone purchases from consumers who are now curious as to Amazon's plans.
First, if proven true, it should not come as a surprise to anyone to learn that Amazon would release a phone. I mean, for as popular as the Kindle Fire has been, this was the logical next step -- another way to increase its means of distribution.
Furthermore, one has to imagine that while the Kindle Fire was in production, it would have saved Amazon plenty of R&D capital to conduct tests and figure out its potential worthiness during that time since one would think it would be on a similar platform -- just as the iPhone resembles the iPad.The only question would be, what would Amazon call its phone? May I suggest the "Kindle Flare or the Spark? It has a nice ring to it. But I digress... Would Amazon be able to gain any traction in smartphones? After all, this was an advantage that Apple had when RIM was the only dominant player within the space after it was able to expunge Palm. However, today along with the usual suspects, Amazon has to contend not only with Samsung but also HTC, which is now the fourth-best-selling name in the market. So it's not exactly going to be a cakewalk. It's bad enough to have to fight against Apple and Google, now it has to compete on a course where even the fourth best player is ranked. Another issue is how will it sell its phones? Will it be outside of its website? This is another major hurdle -- its means of distribution.
Apple has a clear advantage where in addition to its Apple retail stores, it also partners with wireless carriers including Verizon (VZ), AT&T (T) and Sprint (S). Amazon would be forced to forge some similar deals - likely against its own online preference. I don't see how it can afford not to. What would it gain by restricting sales solely to its website except lost revenue? Google tried this with its Nexus One phone by offering it exclusively from its website and that did not work out very well. Also, it would have to consider on a pricing structure. Would it sell the phones at a loss as it does with the Kindle Fire in order to gain share in content distribution?
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