Amazon to Launch a Smartphone?

Bloomberg reports that Amazon.com (NASDAQ: AMZN) may launch a smartphone, which would mean the world’s largest e-commerce company would join the mobile phone sector just after Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG) did. All of the new offerings from these firms move into a market already dominated by Apple (NASDAQ: AAPL) and Samsung, and one which is crowded by second-tier companies such as HTC, Motorola and Sony (NYSE: SNE). It would appear that Amazon has decided to take a long shot, which is extremely risky. That risk could be offset by the view of Amazon management that the company cannot be left behind in one of the hottest markets in the world.

Amazon already has one of the best-selling tablet PCs. It Kindle Fire leveraged the success of the Kindle e-reader. And Amazon has the advantage of its e-commerce site, which is visited by hundreds of millions of people. The Amazon brand has expanded well beyond books and has overwhelmed parts of the consumer electronics and media businesses. That means its leverage in smartphones is larger than it may seem at first.

Accomplishment in the smartphone industry is based on at least three things, and Amazon already has had some success in each. The first is the capacity to deliver a large array products for smartphones. For companies like Apple, this is software applications. For Amazon, it is media and potential special access to its e-commerce platform.

Amazon’s second advantage is that it already has a foothold in the portable Internet-enabled product market. The Kindle has given it that. There is a natural marriage between smartphones and tablets. Apple has found that to be true, and so has Samsung. People appear to associate quality smartphones together with tablets. The most successful brands encompass both.

Finally, Amazon has a universally recognized brand. The same cannot be said for competitors in the smartphone business like HTC, LG and Sony. It has taken Amazon decades to establish its brand. Now it gets to see how strong that brand is if extended beyond its traditional markets. The success of the Kindle is some indication that such extensions can work for Amazon.

It would seem that the smartphone industry is too crowded for a new contestant. Amazon, however, has strengths that few other competitors have.

Douglas A. McIntyre