Why Amazon's Smartphone Needs More Than 3-D to Beat Apple's iPhone

NEW YORK (TheStreet) -- Last Wednesday, Amazon (AMZN) asked journalists, developers and its 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.

Amazon stock closed Friday at $329.67, shooting up more than 7% since before the announcement. But the shares are still down 17% year to date.

It's a little surprising that so much attention is now given to a phone that has been rumored to be in production for almost two years. Observers desperately want another contender to Apple's (AAPL) iPhone dominance and Samsung's incredible volume within its Galaxy line.

All told, when you include Microsoft's (MSFT) Windows phone and BlackBerry's (BBRY) Z10 and new Z3 models, Amazon is entering a crowded jungle. But what the other devices don't have is a 3-D feature, which experts believe will set Amazon apart.

The following YouTube clip demonstrates some of the phone's 3-D capabilities. Take a look and in the comments section, let me know what you think.

The 3-D elements, if included, can possibly be a game changer. Rob Enderle, principal analyst at the Enderle Group, said the 3-D feature would make it easier to view icons and make the phone appear as if it has more screen space.

For Amazon, the idea is that it would give shoppers a better look at products that they want to buy. And by coming out with Amazon's own phone, CEO Jeff Bezos will have established a direct link to his consumers to keep them returning to his storefront.

There's nothing that Bezos would hate more than to contribute to the growth of Apple's iOS and Google's (GOOG)  Android platform. But if the phone isn't priced correctly, it can hurt Amazon more than it affects its competitors.

In July 2012, I talked about the potential headwinds that Bezos is likely to face going toe-to-toe with Apple and Samsung. Today, with the smartphone market having suffered from low average selling prices and high-end device saturation, Amazon's challenges have become greater.

Last month, Colin Sebastian, an analyst with Robert W. Baird, warned investors, "An Amazon smartphone could be fraught with risk." Bezos wants all of Amazon's content, which includes books, movies and music, to run on as many Amazon devices as possible. But as Sebastian pointed out, "launching a stand-alone phone could add margin pressures and significant competitive headwinds."

Amazon bulls will argue that these issues won't matter. Given Amazon's "razor blade" business model, which includes selling devices like Kindle Fire at a loss, that may be correct. But the reason why the stock is down 20% from its 52-week high is that the Street now cares about Amazon's profitability.

Until we know more about the phones and, more important, how much they will cost, there will continue to be speculation. What we do know, however, is that Bezos is a great visionary. Now that he's got a 3-D image into the future, he's even tougher to bet against.

At the time of publication, the writer 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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