Why Amazon's Smartphone Is No Threat to Apple

NEW YORK (TheStreet) -- As an unabashed Apple (AAPL) shareholder, I was asked to weigh in on rumors that retail giant Amazon (AMZN) 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?

Then there is the issue of Samsung, which has grown by virtue of its lower-cost phones. These are the ones that are priced in the range of $100 to $200. Is that the market Amazon will go after? Then there is the issue of distribution.

Will Amazon restrict selling of the phone solely through its website? There are those who believe that this is what Jeff Bezos will do. But I don't see how this makes any sense.

Then there's also the issue of carriers like Verizon (VZ) and AT&T (T), which have helped Apple generate strong annual sales, in addition to its own retail outlets.

The way I see it; it doesn't help Amazon to limit its phones only to its Web site -- not if it wants to maximize the volume potential.

Let's not also forget that the phones will need an operating system. Amazon already has a relationship with Google (GOOG), which powers its Kindle Fire tablets and Fire TV, so it makes sense to assume that Android will be the chosen OS. But does Amazon want to strengthen Google, which is a competitor in many respects?

For that matter, it would also make sense if Amazon were to pick off BlackBerry (BBRY), which recently made it known that it was willing to sell its handset business. Amazon has the cash to do the deal. Plus BlackBerry would come with considerably less risk and global customer base that is hungry to revive the brand.

The good news is Amazon will not be judged on similar metrics to Apple. Phones will not be the company's main revenue generator. Bezos is looking to build Amazons ecosystem so that his company does not have to rely on hardware from its rivals as means to sell his goods. And this is exactly why Apple has nothing to fear.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

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

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