Is Amazon moving into smartphone market?

Amazon, a company of seemingly boundless ambition, appears to be venturing into yet another market: smartphones.
By MAE ANDERSON, Associated Press Published: June 18, 2014
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Amazon, a company of seemingly boundless ambition, appears to be venturing into yet another market: smartphones.

The corporate juggernaut that started out with books and soon moved into music, video, cloud computing and Kindle e-readers is hosting a launch event Wednesday in Seattle, and media reports indicate the product will be an Amazon phone — perhaps one with multiple cameras that can produce 3-D photos.

Amazon declined to comment, but analysts said the goal is almost certainly a device designed to get customers to buy more things from Amazon. It might include an Amazon shopping app or other features tied in tightly to the products the company sells.

“It’s Amazon. That says to me the core value proposition is going to be about shopping,” said Ramon Llamas of the research firm International Data Corp.

Amazon’s phone comes at a time when the nation’s largest e-commerce company is at a crossroads.

Its stock, which surged for years despite narrow profits, has dropped 18 percent in 2014 to about $326, in part because investors have been losing patience with its habit of plowing revenue back into new ventures.

Analysts said the move into smartphones is a bit of a head-scratcher, since the company is a late entrant into the highly competitive market.

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At a glance

Amazon’s impact

Here’s a look at the impact Amazon has had in music, video and other markets it has entered:

Books

Amazon.com Inc. started as an online bookstore in 1995 in CEO Jeff Bezos’ garage in Bellevue, Wash. As more and more bookstores have closed, Amazon is now believed to be the nation’s largest bookseller, with an estimated 30 percent of a total book market that PricewaterhouseCoopers estimates hit $34.9 billion last year, and 60 percent of an e-book market that PwC pegged at $7.9 billion.

Music

Amazon is a major player in music. It has sold compact discs by mail since 1998 and digital downloads since 2007. Russ Crupnick, managing partner of consulting company MusicWatch, pegs Amazon’s share at 18 percent of the $2.8 billion digital download market in the U.S. last year and 23 percent of the $2.1 billion market for CDs. Apple’s iTunes commands about 67 percent of digital downloads. Amazon last week launched a music streaming service that makes more than 1 million tracks available to members of its $99-a-year Amazon Prime subscription plan.

Tablets

Amazon took over the e-book market soon after its first Kindle was launched in 2007. It took a big step by introducing its full-color Kindle Fire tablet in 2011, with a price starting at $199 and a screen just 7 inches diagonally. But since then, others have matched the size and price, especially Samsung, which has made big gains. Amazon’s share of global shipments has slid from more than 7 percent in 2012 to 2 percent in the first quarter of the year.

Movies and TV shows

Amazon is a large retailer of DVDs and Blu-ray discs, and also offers online rentals and purchases of digital video products. Amazon has 15 percent of the $1.8 billion U.S. market for movie and TV show rentals and downloads, trailing Apple’s 58 percent, according to Dan Cryan, an analyst with market research firm IHS. Cryan estimates Amazon accounted for 15 percent of the 43.6 million active U.S. subscribers of streaming video plans through its Prime Instant Video service. Netflix accounted for 73 percent, while Hulu Plus had 12 percent.

Cloud services

Amazon essentially created the marketplace for what is known as cloud infrastructure as a service in 2006 with Amazon Web Services. That is where it allows its servers to be used by third parties to host the data and applications they need to run mobile apps, websites and other services. As the overwhelming market leader, Amazon maintains five times the computing capacity of the next 14 service providers combined, according to Gartner analyst Lydia Leong. Amazon is aggressive with price cuts and innovation, which will probably keep competitors like Microsoft from catching up for years, Leong said.

Overall retail

Amazon sold $40.8 billion worth of goods in North America last year. That’s 17 percent of all e-commerce, according to Anne Zybowski, vice president of retail insights at research firm Kantar Retail.

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