An Amazon Smartphone: Bezos Will Have a Lot of Questions to Answer

NEW YORK (TheStreet) -- Two months ago, with Fire TV, Amazon (AMZN) lifted the curtain on its plans to take over the living room.

Killing off helpless bookstores and big box retailers hasn't been enough.

With Fire TV, CEO Jeff Bezos entered a space already crowded with products from (among others) Apple (AAPL) and Google (GOOG). But he's not done.

On Wednesday Amazon asked journalists, developers and Amazon customers to request invitations for a news event scheduled for June 18. If reports are to be believed, Amazon will either announce its plans to enter the smartphone space or unveil an actual device.

In Wednesday's tweet announcing the event, the company included an image of a black object with an Amazon logo that could be a phone.

Jan Dawson, a technology-industry analyst who runs research and advisory firm Jackdaw, described this as Amazon's entry in the most ubiquitous device category there is.

The smartphone is a growth area, but just like the living room, it's a crowded, competitive one.

It is dominated by Samsung, which has a 31% market share, followed by Apple, which controls 15% of the market.

There's also Microsoft's (MSFT) Windows phone, which is showing modest signs of life. And the market is bookended by BlackBerry (BBRY), which refuses to go away.

What does Bezos hope to accomplish with an entrance into this space?

I don't doubt for a moment that Bezos understands the end-game for Amazon. But as evident by the stock's 23% year-to-date decline, the company's persistent "growth at all cost" mentality is quickly becoming an annoyance to investors.


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Amazon's Kindle Fire is a good product and has sold well compared to Apple's iPad, but Apple is the only one of the two making any money on tablets.

Although Amazon's Prime movie streaming service has proven a worthwhile alternative (I won't say threat) to Netflix (NFLX), it is the latter that is steadily gaining momentum in the U.S. and in international markets.

In April, while citing anonymous sources, The Wall Street Journal reported that Amazon would begin selling a phone in September. This is the same expected timeframe for the release of Apple's iPhone 6.

Both companies have heightened their rivalry in recent years, which began with Amazon's launch of the Kindle Fire. But the so-called "digital gateway," offering consumers music, books, movies and apps is the new battleground. And Bezos apparently doesn't want Amazon to rely on any other hardware but its own.

How much will the phones cost? Will they be sold at a loss like the Kindle Fire? Will Bezos restrict sales of its phones to its Web site or will they be made available elsewhere?

Apple partners with wireless carriers such as Verizon (VZ), AT&T (T) and Sprint (S). Will Amazon be forced to strike similar deals if it hopes to gain share in content distribution?

All told, there are more questions with an Amazon phone than there are answers. Investors betting on the stock, which is still expensive, should hope that Bezos can answer these questions when he's called.

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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