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Amazon.com Chief Executive Officer Jeff Bezos wants control of the smartphone homescreen so he can put more of the company's services squarely in front of consumers.
More than seven years after Apple introduced the iPhone, Amazon will unveil its first foray into the market on Wednesday at an event in Seattle hosted by Bezos.
The company is jumping into a crowded and hyper-competitive smartphone arena dominated by deep-pocketed rivals such as Samsung Electronics and Apple, as well as lower-cost rivals from Asia, even as sales growth slows in some markets that are saturated.
By introducing a handset, Amazon can directly push access to its online store, or digital content like music, movies and games, to consumers. A smartphone also adds to its growing line-up of tablet, e-reader and other hardware that can help Amazon circumvent Apple, Google and Samsung, which serve as digital gatekeepers by controlling how applications and media reach customers on mobile gadgets.
"Imagine a homescreen of all Amazon apps - that's kind of what they are looking for," says Carl Howe, an analyst at Boston-based Yankee Group. AT&T will be the exclusive carrier for the new smartphone, says a person familiar with the matter, who asked not to be identified because the deal isn't public. Fletcher Cook, a spokesman for AT&T, declined to comment on whether AT&T had the Amazon phone exclusively. An Amazon representative didn't immediately respond to a request for comment.
Diversified Player
A smartphone underscores how far Amazon has moved from its roots as an online book-seller. Just as Apple has the iTunes store so consumers can buy music and videos, and the App Store for downloading mobile apps, Amazon now has similar services.
The web retailer says that its app store has tripled its titles over the past year to more than 240,000 programmes, primarily for its tablets, and is available in almost 200 countries. Its $99-a-year Prime membership for unlimited shipping also provides access to movies, television shows and music.
Michelle Taylerson, a spokeswoman for Amazon, declined to comment on the smartphone.
Yet the smartphone industry is an increasingly complicated market to navigate. The devices had generated sales of $338.2 billion last year, up 21 per cent from 2012, according to researcher IDC. Much of the growth has been coming from developing countries like China, where local manufacturers like Lenovo Group and Xiaomi Corp are gaining popularity. In the US, where Apple and Samsung are the biggest players, growth is slowing.
Those willing to spend big on smartphones also are not always successful. Google bought Motorola Mobility in 2012 and subsequently created its smartphones such as the Moto G. The handset unit had just 6.3 per cent of the market at the end of February, according to ComScore. Google is now in the process of selling the business to Lenovo Group.
Standing Out
To distinguish itself, Amazon's handset might feature 3-D capabilities that don't require glasses. Howe says Amazon also could introduce a new pricing structure. Amazon has shown a willingness to sacrifise profits if it means gaining customers. Of its $19.7-billion in sales last quarter, the company generated $108-million in net income, or less than 1 cent of profit for every dollar of revenue.
"We shouldn't underestimate their ability to stand out from a crowded market," Howe says.
In a nod to the competitive market, Amazon last week sent out invitations to its Seattle event with a copy of the book "Mr Pine's Purple House." The story features a man who decides to distinguish his house from others on the block by painting it purple. The book says, "A white house is fine, but there are 50 white houses all in a line on Vine Street. How can I tell which house is mine?"
