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TheStreet Open House

Why Amazon's Smartphone Is No Threat to Apple

Stocks in this article: AMZN AAPL GOOG BBRY VZ T

NEW YORK (TheStreet) -- As an unabashed Apple (AAPL - Get Report) shareholder, I was asked to weigh in on rumors that retail giant Amazon (AMZN - Get Report) is planning to unveil a smartphone. My only response was, "Why not?"

Nothing Amazon does or plan to do in the future should surprise anyone. What should be a surprise, however, is if that endeavor produces any profit.

This is no slight at Amazon. But CEO Jeff Bezos has an entirely separate mindset when it comes to the bottom line. And it is for this reason I don't expect Apple to care very much about a new perceived threat.

According to the Wall Street Journal, which cites an anonymous source, Amazon has already developed several designs of the phone. But these sorts of reports have been around for a couple of years. Amazon has never publicly refuted these claims.

What seems to have gotten Apple investors uncomfortable are notions that the phone will be able to display 3-D images without special 3-D glasses. But how much will that matter? Theres currently no practical purpose for a 3-D feature.

The Journal reports that the phone announcement will be made in July and the company will begin selling the device in September - the same expected timeframe for the release of Apples iPhone 6. There are critical details investors should consider before getting too far ahead of these reports. Amazon has not answered calls for questions.

First, if these rumors are true (this time), how much traction can Amazon achieve in a phone market that is already crowded? Not to mention, saturated and suffering from weak average selling prices.

Apple and Samsung (SSNLF) are currently the top two players in global sales. With Amazon's unconventional business methods, including taking a loss on each Kindle Fire tablet sold, how much can it gain from a smart phone?

Although the company's tablets are priced considerably lower than Apples iPads, Apple has always remained the dominant force. Will the phones be any different? How much will they costs?

In the past, there were rumors that Amazon would offer non-subsidized version phones starting at around $400. And if Amazon does offer subsidies, assuming the phones do enter Apples market, will their be enough margin to offset investors concerns about Amazons lack of profitability?

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