Amazon.com Inc. (NASDAQ:AMZN) will not be releasing a phone in 2013, and if they were to release a phone they would charge for it. Rumors of a free Amazon phone circled the tech world over the weekend, but the company has firmly denied the rumors. The rumors originally came from Jessica Lessin, and it was that site that brought an end to them.
Amazon.com Inc. (NASDAQ:AMZN) was clearly not happy with the rumors that it was planning on releasing a phone. Unlike Facebook Inc (NASDAQ:FB), which let the rumors of a phone linger and dominate conversation about the company, AMZN stepped in and changed the conversation. There will be no Amazon phone in 2013, and the company will not release a phone for free.
Amazon’s phone release
Despite the company’s strong denial of a phone, Amazon.com Inc. (NASDAQ:AMZN) may be planning a phone for release next year, or at some point in the future. The company has been doing well in the hardware space ever since it released the original Kindle. Almost every hardware market Amazon has entered has been new, however, the phone market is much more competitive.
AMZN developed the first ever successful small tablet in the Kindle Fire, and the company created the first truly successful e-reader in the Kindle. The smartphone market is already dominated by companies with huge success and massive brands. Competition is already reducing margins and stifling new entrants.
The only way for AMZN to be competitive with a smartphone might be to give the device away. That’s what made the rumors of a free Amazon phone somewhat believable. The company will not do that, but if and when an Amazon phone does arrive, it will likely be very cheap.
Amazon’s hardware problems
The problem for shareholders in Amazon.com Inc. (NASDAQ:AMZN) is that there is little intention to make a profit off of hardware sales. Amazon is a jack of all trades, but at heart it seems to want to be a content deliverer.
The firm sells the Kindle and the Kindle Fire range at little or no profit in order to engage users in its content delivery services Amazon Prime and Kindle book sales. The business model makes Amazon Inc. (NASDAQ:AMZN) difficult to value. The advent of the Amazon phone era will likely increase the complexity of valuation for shareholders.