CEO Jeff Bezos made the business plan clear last week in Santa Monica: Amazon is not a gadget company; it's a services company. It doesn't want to make money when people buy devices; it makes money when they use them.
Later, Bezos said something to Nick Bilton of The New York Times that the entire tech world, including Cupertino and AAPL bulls to the north and south, should pay close attention to.
Bilton asked whether we should expect a smartphone or television from Amazon, and Bezos said: "We'll have to wait and see. We won't do something unless we think we have some interesting new way to do it."
Amazon devices serve a core strategy: to drive e-commerce revenue and lock people into the company's ecosystem. It's all about engagement and loyalty.That, in and of itself, is interesting and innovative. In fact, it's probably only a matter of time before another retailer takes a stab at the same strategy. Think about it, a major retailer, say Best Buy (BBY), partners with Google (GOOG) or Research in Motion (RIMM) to build a tablet. Then it says to consumers: Spend $500 or more and get our exclusive tablet for free. Of course, when you fire the thing up, it's a conduit to buying stuff, seamlessly, from Best Buy. Would that work? Probably not. Best Buy is closer than other brick-and-mortar outfits, but, chances are, its ecosystem cannot support a loss leader like Amazon's can. Then, as Bezos said, there's the "interesting" part. Folks who attempt to discount what Bezos did last week live in denial. The features in the Kindle are simply out of this world. Parental controls that limit everything but reading. A "time to read" indicator that tells you how long it will take you, based on your reading style, to reach the end of a chapter. Eight-week battery life on the Kindle Paperwhite, even when backlit. I don't have enough space to list and do justice to every innovation. Device usage drives e-commerce revenue. These new Kindles will increase usage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts