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11/18/2011
06:31 PM
Thomas Claburn
Thomas Claburn
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Amazon Kindle Phone: Android Me-Too Could Flop

Amazon's cooking up a phone for 2012, analysts say. But will it be more than just a customer loyalty tool?

Not content with being the dominant online bookseller, Amazon long ago branched out into all manner of consumer goods. It has pioneered computing as a utility service through Amazon Web Services, and more recently has become a major seller of digital downloads and of tablet devices tuned to consume that content.

There's an obvious hole in its product portfolio and it's shaped like a mobile phone--the company has an Android-based App Store and an Android-based tablet, but no Android phone bearing its brand. That, however, may change.

Research analysts working for Citi believe Amazon will start selling a smartphone of its own late next year.

"Based on our supply chain channel checks in Asia led by Kevin Chang, Citi's Taipei-based hardware research analyst, we believe an Amazon Smartphone will be launched in 4Q12," said a Citi research note published Nov. 17.

It may be an obvious move for Amazon, given the company's push into tablet territory and its affinity for Android. But it's a move motivated by the most pernicious trend in computing these days: vertical integration, aka, platform imprisonment.

Amazon wants to sell you a phone so you'll buy Amazon App Store apps and Kindle e-books, which will almost certainly be readable on this expected Kindle phone (too bad the name Phondle won't fly).

[ Want to avoid Android App stinkers? See 10 Android App Flops. ]

If only Amazon aspired to sell "a revolutionary and magical product that is literally five years ahead of any other mobile phone," to borrow the words used by the late Steve Jobs to describe the first iPhone.

Instead, expect something akin to a store-branded credit card, a tool more focused on customer loyalty than on customer delight and amazement. Amazon may have an excuse--we're just following in the path of Apple--but that doesn't mean there aren't less limiting ways to keep customers engaged.

Amazon's smartphone looks like it will cost somewhere between $199 and $250, based on an estimated manufacturing cost of $150 to $170. Maybe Amazon will sell it for a loss, as way to drive the sale of apps and digital content.

But it will be hard to beat the price of the iPhone 3GS, available with a two-year service contract for $0.99 from AT&T. Chances are Amazon's phone will be undistinguished mid-range hardware running a forked version of Android 4.0, even as Google-Motorola phones emerge with a more modern version of Android.

If Amazon cares about making a great smartphone, it will pursue Steve Jobs' dream of developing a separate phone network, outside of the existing mobile carriers, and it will do so not to create captive customers but to deliver wireless service at rates far lower than today's inflated mobile subscription plans. Republic Wireless has the right idea with its $19 a month smartphone plan, even if it may not be the company that changes the game. The next great smartphone will be the one that transforms the network and its cost structure.

Amazon, think different(ly). If you're going to sell phones, make sure it's not running Android version me-too.

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