Amazon's smartphone handset will help Bezos make direct appeal to users

  • Article by: ADAM SATARIANO , Bloomberg News
  • Updated: June 17, 2014 - 7:40 PM

Users may get a phone whose home page is full of Amazon icons.

– Amazon.com Chief Executive Jeff Bezos wants control of the smartphone home screen 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 Wednesday at an event in Seattle hosted by Bezos. The company is jumping into a crowded and hypercompetitive 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 more directly push access to its online store, or digital content like music, movies and games, to consumers. A smartphone also adds to the growing lineup 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 home screen of all Amazon apps — that’s kind of what they are looking for,” said Carl Howe, an analyst at Boston-based Yankee Group.

A smartphone underscores how far Amazon has moved from its roots as an online bookseller. 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 said this week that its app store has tripled its titles over the past year to more than 240,000 programs, 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.

Yet the smartphone industry is an increasingly complicated market to navigate. The devices generated sales of $338.2 billion last year, up 21 percent from 2012, according to researcher IDC. Much of the growth has been in developing countries like China, where local firms like Lenovo Group and Xiaomi Corp. are gaining popularity. Growth is slowing in the United States, where Apple and Samsung are the key players.

Those willing to spend big on smartphones aren’t always successful. Google bought Motorola Mobility as part of a $12.4 billion deal in 2012 and subsequently created its own smartphones such as the Moto G. The handset unit had just 6.3 percent of the market at the end of February, according to ComScore. Google is now in the process of selling the business to Lenovo Group for $2.91 billion.

Consumers may also not get as full an array of services through an Amazon smartphone as through other devices. The company is embroiled in contract negotiations with media companies including Hachette Book Group and Warner Bros. over the cut of sales of certain products, resulting in limited inventory of some titles.

Still, Amazon has shown a willingness to sacrifice profits to gain customers. Even though it had $19.7 billion in sales last quarter, the company generated only $108 million in net income.

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