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TheStreet Open House

Amazon Announces Fire Phone

Stocks in this article: AMZN

NEW YORK (TheStreet) -- Amazon (AMZN - Get Report) unveiled the Fire phone in Seattle, as the company continues to push its hardware on new and existing customers, as it looks to sell additional content and media to boost sales, aided in part by a new feature, known as Firefly. 

The new phone, announced at Fremont Studios in Seattle, is a 4.7-inch phone that runs on a quad-core 2.2 GHz process, has 2 GB of RAM, and has a Corning (GLW) Gorilla Glass screen, along with a Andreno 330 Graphics Processor. The phone also comes with Dolby virtual surround, and has Dual stereo speakers, a 13 MP rear-facing camera, along with a f/2.0 five element lens. Bezos remarked that the Fire phone has an exceptionally strong camera, and with the use of Amazon Cloud Drive, users will have unlimited storage of their photos for free.

The phone will sell for $199 for the 32 gigabyte version and $299 for 64 gig including a contract with AT&T  (T).

CEO Jeff Bezos also talked about how Amazon's phone benefits from its ecosystem, noting the company has "tens of millions of Prime members," but declined to give an actual amount. Bezos said that the Amazon way of doing things has led to them building a phone on the foundations of the company's hardware expertise, its millions of customers and the Prime ecosystem. "Patience, persistence, and obsessive attention to detail," Bezos said during the presentation, noting that Amazon's mantras have allowed Amazon to be the #1 company on the American Customer Satisfaction Index, an indication that the company has earned the trust of its customers, which Bezos said is a recipe for success.

Bezos unveiled a new feature known as Firefly, which can recognize over 100 million items, such as a CD, song, book, game, food or other item. For a instance, if a user sees a CD, a song from it can be played on Amazon on another music app such as Pandora or iHeartRadio. Users can scan a book using Firefly, and then purchase it.

Though Amazon has traditionally sold its hardware, including the Kindle Fire tablets and Fire TV set-top box either at cost or at a slight loss, the phone could potentially boost Amazon's revenue, both in hardware sales, as well as additional Prime subscriptions.

SunTrust analyst Robert Peck believes that if the company sells 2.7 million phones at an assumed $400 average selling price (to the carrier, not consumer), it could be worth $1 billion in hardware sales. Assuming 70% of the sales go to new Prime customers, that could boost Prime revenue by around $200 million, plus perhaps as much as $900 million in additional content revenue.

"In total, this scenario would drive >$2b revenue lift for Amazon, or a 2% lift off of Street consensus for 2015," Peck said in a note. He rates shares a "buy" with a $425 price target.

Amazon shares were reacting strong to the news, rising nearly 2.5% to $332.90 after the announcement.

-- Written by Chris Ciaccia in New York

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