Should Amazon make a Kindle phone? Possibly not

Competitive mobile market no place for the faint hearted, analyst says

Stewart Mitchell
2 Apr 2013

First Facebook and now Amazon: everyone wants to build phones these days, at least according to internet speculation.

Amazon has added fuel to rumours it's planning a handset by hiring Charlie Kindel, a long-time Microsoft employee who specialises in smartphones.

Kindel's LinkedIn status lists him as "director, something secret at Amazon", and explains he's building a team - including mobile developers and testers - to exploit a "totally new area for Amazon".

Hiring Kindel straight from work on Windows Phones suggests Amazon is getting closer to following its move into tablets with a mobile phone.

It's a huge undertaking given the complexity and potential costs involved – especially given that Amazon is a very, very low margin business

However, there remain big questions over whether the company would be right to push out a handset – with Amazon's hardware margins remaining slim and the mobile industry already facing a struggle against the dominance of Samsung and Apple.

"If you look at the move into the tablets, a phone makes sense - it's a massive growth market and Amazon is extending its core retail model into the mobile domain and the mobile phone, being the most ubiquitous device is the next logical step," said Geoff Blaber, director of devices and software platforms at analyst firm CSS insight.

"But all that said, it's a huge undertaking given the complexity and potential costs involved – especially given that Amazon is a very, very low-margin business."

According to Blaber, the company would want to be able to sell content via the device, but whether content sales paired with its low margins would recoup hardware costs is another matter.

"Look at what's happening to manufacturers in the smartphone space and there are very few that are competing profitably and that tells a story," he said.

"It's a relentless business and it's very difficult to remain competitive - the one big asset Amazon has is a content and services story, but it doesn't have any capability or intellectual property in the mobile space for making hardware."

Potential partnerships

Given that Amazon has minimal experience of smartphone development – although it could rework its Android OS running on the Kindle Fire – Blaber said the company would probably link with a manufacturer to produce a 5in smartphone, big enough for browsing content, but small enough to be properly mobile.

"A partnership would be the logical move, someone like HTC," Blaber said. "HTC needs something in the service realm and Amazon needs a partner with design credentials and operator and channel relationships."

"It will happen, but that doesn't mean it's the right move. The mobile phone industry is extremely challenging at the moment."

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