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Why Amazon Shouldn't Make a Smartphone, But Will Anyway

Stocks in this article: AMZN AAPL BBRY GOOG MSFT SSNLF FB

The Demands of Customer Relationship

The downside of making a smartphone is the implied social contract with the consumer. It's one thing to deliver books, magazines and movies on a Kindle Fire HDX, but it's quite another thing to be the sacred holder of the customer's personal life.

The contact list, the calendar, the reminders, the family photos, the text messages, perhaps credit card numbers, and the browsing history constitute deep and sensitive information about any customer that requires vast experience to protect. The responsibility to deliver emergency calls on demand with a weak signal is great. The protection of that data while the user has the smartphone and after it's been stolen is a severe responsibility.

Another serious responsibility is the curation of malicious apps, via an app store, that might harm the customer. Users expect a richer and more free-wheeling environment for smartphone apps than tablets. In the end, it's the company that sells a smartphone under its brand that takes responsibility for what apps do for and against the customer.

In addition, there will be onerous and plentiful requests from the NSA for all kinds of data, putting Amazon in the uncomfortable position of being both our favorite shopping place but also a cooperating trafficker of all that personal data.

Customers can be particularly touchy about the way this data is handled, and they often have curious expectations of the holder of their data that a court, unpredictably, might agree with. Down the road, one could surmise that Amazon might face its own class action lawsuits.

The Decision

Amazon will be deciding whether its image as a company should change. Does the company want to remain a generally well liked, efficient supplier of goods and services? Or does it yearn for that pledge of allegiance? The price is holding our lives in the balance.

From what we know now, it seems Amazon will make a smartphone and ask for our pledge. The phone may not make a lot of money, but the company will have achieved its goal of further tunneling into customer hearts and minds, habits and needs. It's very alluring. In the end, however, Amazon may wish it never walked this risky path.

But there's no stopping progress.

At the time of publication the author was long AAPL.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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