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Citigroup: Amazon plotting smartphone to challenge Apple's iPhone in 2012

post #1 of 81
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Not content with entering just the tablet market, Amazon is planning to release a smartphone in the fourth quarter of next year, in a move that will challenge Apple and its bread-and-butter iPhone, says one analyst.

Citigroup's Mark Mahaney issued a note to investors saying that, according to the supply chain, the online retailer is planning on releasing a smartphone in time for next year's holiday season, as noted by AllThingsD.

Based on our supply chain channel checks in Asia led by Kevin Chang, Citis Taipei-based hardware research analyst, we believe an Amazon Smartphone will be launched in 4Q12," the note read.

According to the analyst, the device will be jointly developed with Foxconn. Amazon will reportedly pay non-recurring engineering fees to the manufacturer, but the phone and some of its components will be manufactured by the same Hon Hai TMS group that works on Amazon's Kindle e-readers and a rumored 8.9-inch tablet.

Amazon reportedly broke from its usual partnership with Foxconn for the Kindle Fire tablet in a rush to get it out the door. The company is said to have contracted Original Design Manufacturer Quanta because the ODM could save time by piggybacking off of work on RIM's BlackBerry PlayBook.

Mahaney estimates the Amazon smartphone will cost between $150 and $170 to build and may sell for roughly the same amount. For a normal brand like HTC, they need to price the product at US$243 to make 30% gross margin. If Amazon is actually willing to lose some money on the device, the price gap could be even bigger, he said.

The smartphone will likely run Google's Android mobile operating system, as the analyst suggested that Amazon will need to pay an "OS royalty" to Microsoft. The Redmond, Wash., software giant boasted last month that it has achieved patent licenses with half of the Android market. Amazon opted for Android on the Fire, but gave the open source OS a customized look.

The online retailer has adopted a strategy of selling hardware at a loss as a ploy to draw customers to its content offerings. For instance, a teardown of the Kindle Fire revealed that it costs more than its selling price.



In all likelihood, a low margin strategy from Amazon would threaten low-end smartphone makers rather than Apple's iPhone. Backed by the world's largest online store, Amazon may win the race to the bottom on hardware margins because most other hardware makers won't have sales from a robust content ecosystem to fall back on. Downward price pressure in the tablet market from the Kindle Fire has already resulted in a $300 price cut for the BlackBerry PlayBook.

Apple said earlier this month that it's not worried about the Kindle Fire because it believes the tablet will drive customers to the iPad by further fragmenting the tablet market. As such, the iPhone maker may view the prospect of a Kindle phone in the same light.
post #2 of 81
Competition is good. Brings out the best. We get to see all the new stuff.
An Apple man since 1977
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post #3 of 81
An Amazon branded phone? I don't quite understand the value proposition on this. What does Amazon bring to the table? Are they afraid that other smartphones don't drive customers to their online store?

"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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"Apple should pull the plug on the iPhone."

John C. Dvorak, 2007
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post #4 of 81
Quote:
Originally Posted by Suddenly Newton View Post

An Amazon branded phone? I don't quite understand the value proposition on this. What does Amazon bring to the table? Are they afraid that other smartphones don't drive customers to their online store?

It's just another delivery channel for Amazon content. My iPhone has replaced my car stereo as my music player of choice, and it's frequently my e-reader at lunch. Plus, consider that part of the appeal of the iPad and iPhone is that Apple is building an ecosystem of iOS devices that all work together, and they drive sales for each other. That's a helluva good place to be, and Amazon is green with envy.
post #5 of 81
Go Amazon! I hope Amazon can bring a self-subsidized phone, unlocked without US carriers intervention. That would be a game changer!
post #6 of 81
Quote:
Originally Posted by tylerk36 View Post

Competition is good. Brings out the best. We get to see all the new stuff.

This.

If we do see it, expect to see an Android based device, with the similar Amazon UI on top.

But the second the dev community starts to play with it, you'll have a very low cost Ice Cream Sandwich device with stock Android.

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post #7 of 81
Well Amazon is welcome to try this too. I like them as a company so good for them if they can make this work, and good for the consumers if they bring a good product to the market.
post #8 of 81
Quote:
Originally Posted by tylerk36 View Post

Competition is good. Brings out the best. We get to see all the new stuff.

Not when competing on price, then it is just a downward spiral. Look at the Windows-PC market no innovation of any kind and this is what Android will do eventually.

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post #9 of 81
Amazon looking to lower the bar again. Apple products might be the only positive thing coming out of this country right now, thank Amazon for watering that down and taking the one place where we excel away... boo... If your gonna compete, your supposed to make your product better not worse! Raise the bar don't lower it! boo...
post #10 of 81
Yeah, just what the world is sorely missing, another Android phone.

By the fourth quarter of 2012, there will probably be 617 Android phones VS iPhone, and this Amazon phone will simply make it 618 Android phones VS iPhone. It won't affect Apple or the iPhone much. The people with the most to be concerned about are other Android phone manufacturers, as Amazon will try to claim their tiny piece out of an already crowded, messy and claustrophobic Android pie. It's a race to the bottom for the bottom dwellers.
post #11 of 81
Amazon is a good company, but selling a phone? To me, it would be comparable to a Walmart-branded phone. Who would want that?
post #12 of 81
More "competition is good" posts. Why are people obsessed with this mantra? Sometimes it is, sometimes it ain't. Do we really need a gazillion android phones? A gazillion sugary cereals? And if the answer is yes, do we need a bunch of parrots chiming in with "competition is good" as they stroll down the store aisles fingering them?

We'll know if amazon's version of an android phone brings anything to the table when we see it. Since amazon has only one goal, it seems to me: produce loss leader products that drive customers to their store, I doubt it will be anything too exciting.
post #13 of 81
There is no need at all for a Amazon phone. This is just a reflection of the greedy ego of Jeff Bozo.

I am still waiting for my Dunkin Donuts phone.
post #14 of 81
Competition is good as was previously stated by another poster, but really, an Amazon Phone is not going to be anything special.

I can see what the phone will be like now by using the power of my magnificent brain to tell the future!

Cheap, Android, Rebranded Chinese Unit

Done, Dusted, Nothing Special. Move along.

... at night.

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... at night.

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post #15 of 81
Quote:
Originally Posted by Aizmov View Post

Not when competing on price, then it is just a downward spiral. Look at the Windows-PC market no innovation of any kind and this is what Android will do eventually.

Pretty sure this is what Android has already done. I walk into a mobile phone shop and the only difference between 'droid devices in the same price class I can see is the appearance. The only droid phones I see as "vastly different" (used loosely) are the premium range from Sammy.

... at night.

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... at night.

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post #16 of 81
I am still waiting for my Dunkin Donuts phone.[/QUOTE]

heehee
post #17 of 81
Quote:
Originally Posted by hankx32 View Post

heehee

Maybe if I collect enough stickers from the coffee cups in McDonalds I can get a McPhone.

... at night.

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... at night.

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post #18 of 81
Quote:
Originally Posted by cajun View Post

It's just another delivery channel for Amazon content. My iPhone has replaced my car stereo as my music player of choice, and it's frequently my e-reader at lunch. Plus, consider that part of the appeal of the iPad and iPhone is that Apple is building an ecosystem of iOS devices that all work together, and they drive sales for each other. That's a helluva good place to be, and Amazon is green with envy.

Well said.
post #19 of 81
Those basterds! Amazon phone will be DOA, just like the Kindle Fire! Apple doesn't care about the bottom-feeders, so it's suing Amazon over a word, and AI posts three articles on Amazon per day because nobody here gives a damn. No one needs convenient access to a huge selection of consumer products, the economy is flourishing anyway. Amazon's phone will be crap like the rest of the Androidz, who wants a Nexus Prime, HTC Rezound or Droid RAZR when they can have the FreeGS? Amazon will not sell any phones at all, and it will sell so many at a loss that it will go bankrupt. Nobody will buy an Amazon phone but it will steal the better part of Android's market share. It will be useless without the Google Apps, and will also fragment Android by offering incompatible Google Apps.

post #20 of 81
Quote:
Originally Posted by cajun View Post

It's just another delivery channel for Amazon content. My iPhone has replaced my car stereo as my music player of choice, and it's frequently my e-reader at lunch. Plus, consider that part of the appeal of the iPad and iPhone is that Apple is building an ecosystem of iOS devices that all work together, and they drive sales for each other. That's a helluva good place to be, and Amazon is green with envy.

Very well said indeed.
Now that I stop and think about it, it really is just Amazon wanting a slice of the Apple Pie (see that I did there?)

iPad, iPod and iPhone all integrate together with iTunes as the storefront.
Kindle Fire, Kindle, Kindle Phone(?) all integrate together with Amazon as a store front.

... at night.

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... at night.

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post #21 of 81
Quote:
Originally Posted by DrDoppio View Post

Those basterds! Amazon phone will be DOA, just like the Kindle Fire! Apple doesn't care about the bottom-feeders, so it's suing Amazon over a word, and AI posts three articles on Amazon per day because nobody here gives a damn. No one needs convenient access to a huge selection of consumer products, the economy is flourishing anyway. Amazon's phone will be crap like the rest of the Androidz, who wants a Nexus Prime, HTC Rezound or Droid RAZR when they can have the FreeGS? Amazon will not sell any phones at all, and it will sell so many at a loss that it will go bankrupt. Nobody will buy an Amazon phone but it will steal the better part of Android's market share. It will be useless without the Google Apps, and will also fragment Android by offering incompatible Google Apps.


Can't tell if trolling...

... at night.

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... at night.

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post #22 of 81
They can call it aPhone. It's just like another android device. Just like those ultrabooks having windows in it.
post #23 of 81
Quote:
Originally Posted by benanderson89 View Post

Can't tell if trolling...

Not any more than these posters:

Quote:
Originally Posted by hankx32 View Post


heehee

Quote:
Originally Posted by res08hao View Post

There is no need at all for a Amazon phone. This is just a reflection of the greedy ego of Jeff Bozo.

I am still waiting for my Dunkin Donuts phone.

Quote:
Originally Posted by capoeira4u View Post

Amazon is a good company, but selling a phone? To me, it would be comparable to a Walmart-branded phone. Who would want that?

Quote:
Originally Posted by Apple ][ View Post

Yeah, just what the world is sorely missing, another Android phone.

By the fourth quarter of 2012, there will probably be 617 Android phones VS iPhone, and this Amazon phone will simply make it 618 Android phones VS iPhone. It won't affect Apple or the iPhone much. The people with the most to be concerned about are other Android phone manufacturers, as Amazon will try to claim their tiny piece out of an already crowded, messy and claustrophobic Android pie. It's a race to the bottom for the bottom dwellers.

Quote:
Originally Posted by hankx32 View Post

Amazon looking to lower the bar again. Apple products might be the only positive thing coming out of this country right now, thank Amazon for watering that down and taking the one place where we excel away... boo... If your gonna compete, your supposed to make your product better not worse! Raise the bar don't lower it! boo...

Quote:
Originally Posted by Aizmov View Post

Not when competing on price, then it is just a downward spiral. Look at the Windows-PC market no innovation of any kind and this is what Android will do eventually.
post #24 of 81
You can't just "come up" with a device to challenge the iPhone. It requires a big idea and design and planning. Good luck.
post #25 of 81
The thing about consumer electronics now is that anyone can get a phone built or a whatever.

Choose a few parts off the shelf, talk to any one of a dozen assemblers in china and wrap a case around it.

Probably only need to buy in 10,000 lots if you don't customize it too much.
you only have freedom in choice when you know you have no choice
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you only have freedom in choice when you know you have no choice
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post #26 of 81
Quote:
Originally Posted by cy_starkman View Post

The thing about consumer electronics now is that anyone can get a phone built or a whatever...

Yeah, but how about software? What good is your phone without an OS?
post #27 of 81
I want to get a Pep Boys Phone so I can order new windshield wipers with one click
post #28 of 81
Quote:
Originally Posted by tylerk36 View Post

Competition is good. Brings out the best. We get to see all the new stuff.

Shouldn't the Amazon phone be challenging Android instead of iOS? I mean everyone knows by now that Android has kicked the iPhone's ass from here to Jericho. Why challenge the loser? Challenge the clear winner. There's something wrong with the title of this article.
post #29 of 81
Quote:
Originally Posted by benanderson89 View Post

Can't tell if trolling...

is... use ignore list for trolls. And please don't quote or reply to them. Then, if at all possible, their birdbrains will shrink even more.
post #30 of 81
Why is everyone so dismissive, here. Amazon has the potential to (a) beat not just Apple but most Android offerings on price, (b) offer a pretty solid and well-known content eco-system, and (c) has good brand recognition and tech reputation due to Kindle. Just like the Kindle Fire (potentially), this may be the "go-to" phone for people who don't care to spend too much on a phone, and are mostly interested in content (not games & advanced apps), and find the Amazon brand familiar and reassuring.

I agree, it's likely a bigger threat to the Android crowd than Apple, but offering a simple content eco-system that rivals iTunes, at a significantly lower price, is likely to take a chunk of Apple's share too.
post #31 of 81
Quote:
Originally Posted by MattBookAir View Post

Why is everyone so dismissive, here.

... is likely to take a chunk of Apple's share too.

Fear.
post #32 of 81
Quote:
Originally Posted by DrDoppio View Post

Yeah, but how about software? What good is your phone without an OS?

Exactly. Though you could just slap android on, which is basically what is going on.

But then what can you do with it... Ye olde ecosystem and that's where they all turn to mush.
you only have freedom in choice when you know you have no choice
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you only have freedom in choice when you know you have no choice
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post #33 of 81
Quote:
Originally Posted by benanderson89 View Post

Maybe if I collect enough stickers from the coffee cups in McDonalds I can get a McPhone.

Amazing idea. From the company that brought you free wifi around the world, the McPhone. If they also set up their own GSM/GPRS/EDGE/WHATEVER network, could be very interesting...

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

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Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

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post #34 of 81
PLOTTING!!!

Mwuhahahahaha! Big bad evil amazon, give me a break.
post #35 of 81
Quote:
Originally Posted by DrDoppio View Post

Fear.

Nah. We've been through many iterations of this before.

More like harakiri. (And I don't mean Apple).
post #36 of 81
I don't see how this could possibly work with the current status quo. Mainly because this all depends on an initial loss of money for the two big backers (Amazon and Google) with no real guarantee of a return.

Quote:
Originally Posted by DrDoppio View Post

Yeah, but how about software? What good is your phone without an OS?

And there is the real kicker for Google.

I said it when the Kindle Fire was announced, and I will say it again, Google is the one that will most likely lose if these Amazon devices really start to take off. Google gives away their Android OS because it brings in ad revenue. That is how they make money.

The thing about the way that Amazon has modified Android and setup its own store for applications is a threat to that revenue stream for Google. A nice curated store will mean less free/ad supported apps in the Android environment, which means less money for Google. Which means over the long haul less incentive to continue to develop and advance Android.

Then couple that with the fact that to date Amazon isn't offering any of Google's other services, which frees Amazon from having to worry about Google having any leverage over the development of Amazon's version of Android.

So, what happens if Amazon devices become the largest segment of Android devices? Most likely Google isn't going to continue to spend money to develop an OS that is really only benefiting Amazon. Of course, by that time Amazon may be able to develop Android on their own, but now it isn't really the open Android that so many people know and love.

Which brings me to my next point. The Kindle Fire is too easy to hack and install a full up Android OS on. Amazon cannot allow this to happen too much. They are losing money on the hardware and expecting to make that money back through content sales. Which is not unreasonable if pretty much everything on the devices point to Amazon supplied content. However, if too many customers buy Amazon devices and then install the Google music app or the B&N eReader app then that content money is not going to Amazon and they will not be able to justify continuing to make hardware and sell it at a loss.

Which means, they either stop making hardware, stop selling it at a loss, or they start walling off their garden more and more to make sure that those people who buy their devices have to buy their content.

I just don't see how things can play out much different with the current setup.

Oh, and as to competition. Yeah, competition is good, but lets be honest, an Amazon phone is nothing like the Kindle Fire. The Kindle Fire only made a name for itself and is only selling well because of its price. In this regard it was a good product release as that it will put some competitive pressure on Apple to address the lower priced tablet market, which I expect they will do with the upcoming iPad releases. The problem with projecting that to an Amazon phone is that there are already a TON of cheap smartphones available. Including from Apple. So, Amazon entering the smartphone market isn't doing a thing to increase competition in any real sense.
post #37 of 81
Quote:
Originally Posted by mknopp View Post

I don't see how this could possibly work with the current status quo. Mainly because this all depends on an initial loss of money for the two big backers (Amazon and Google) with no real guarantee of a return....... Etc

Outstanding analysis.

Amazon will rue the day it got into the hardware business. They're going to discover - much as Google did with its Nexus (and yet refused to learn) - that it's a very different cup of tea. It's going to be a far bigger challenge than producing and selling a unifunctional e-reader. They will backtrack, and in a big way.
post #38 of 81
Quote:
Originally Posted by lkrupp View Post

Shouldn't the Amazon phone be challenging Android instead of iOS? I mean everyone knows by now that Android has kicked the iPhone's ass from here to Jericho. Why challenge the loser? Challenge the clear winner. There's something wrong with the title of this article.

Compare revenue and profit of all Android devices compared to iPhone. Android, while gaining huge market share, is still VERY far behind in profitability and revenue. Given the trend to race for the bottom, this will probably continue. Amazon is looking at profit margin and is after the iPhone because of that.
post #39 of 81
Quote:
Originally Posted by mknopp View Post

I don't see how this could possibly work with the current status quo. Mainly because this all depends on an initial loss of money for the two big backers (Amazon and Google) with no real guarantee of a return.

...

I cannot but agree with most of your thoughts. The major challenges before both Amazon and Google in those scenarios are clearly sustainability. Google's free development of Android cannot continue indefinitely unless they find another revenue source than ads. Amazon cannot survive if they adopt selling at a loss as a MO.

But these are challenges in front of the companies. While they try to figure out how to develop, survive, and make a profit, the consumer wins. So what if Amazon phone flops: we can live without it, because there are many options. What if one "open" OS went under (Nokia's Maemo), we have another one, and if Google abandons Android someone else will take over. As long as there is diversity and competition, the intelligent consumer will always be able to profit. As to companies, I leave their problems to their owners.
post #40 of 81
Quote:
Originally Posted by ascii View Post

You can't just "come up" with a device to challenge the iPhone. It requires a big idea and design and planning. Good luck.

Amazon and Wall Street go hand-in-hand. Both believe that most consumers are morons that can't tell the difference between high-quality and soso quality when it comes to electronic devices. in their eyes a Kia is just as good as a BMW as they'll both get you to work on time. Wall Street favorites are companies that build "just good enough" products. Extra fit and finish on a product doesn't really count for anything except excess overhead. Build products cheaply and sell them cheap so that all the masses can enjoy them is Wall Street's thinking.

Amazon gets to be praised for selling a $199 tablet to the masses and Apple is now evil for selling a $499 tablet because it is perceived that Apple is cheating the masses by not allowing them $199 iPads. Steve once said that Apple couldn't build a $500 tablet that wasn't crap. Jeff Bezos somehow bent that rule and now Wall Street loves him and his company. I've yet to see a review of the Kindle Fire saying it was crap. Why? because little is expected from a $199 bare-bones tablet. All I read is the tablet is "just good enough" for what it's intended to do. That's what Jeff and Wall Street settle for. That's what turns a $199 Fire as a MAJOR challenger to the $499 iPad.

When Amazon's aPhone is introduced it will be claimed as a challenger to the iPhone and how it will hurt Apple's iPhone sales. I believe anything that Wall Street sees as a device that will grab market share from an Apple device as an Apple device challenger. The aPhone won't even come close to build quality of an iPhone, but will still be called an iPhone challenger, nontheless. Wall Street doesn't seem to care or notice that Amazon's standards don't come close to Apple's standards. Maybe Wall Street wants consumers to be satisfied with low-quality products. I think that's a shame.
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