Amazon’s (Not So Smart) Smartphone?
Amazon.com is rumored to be testing a smartphone that could be released in early 2013. But does the online retailer stand a chance against Apple’s iPhone and Google’s Android? One analyst said that an Amazon smartphone may not be the smartest move.
While Amazon’s Kindles and e-readers would give the company leverage in the phone market, Colin Sebastian, R.W. Baird senior analyst, is concerned about the expense.
“Phones are more utility devices,” he said. “It requires carrier distribution and developing apps like maps and search, which are potentially large investments for Amazon.”
If Amazon were to launch a smartphone, Sebastian told CNBC’s “Squawk on the Street” on Friday that R.W. Baird would not automatically downgrade the stock, but the outlook would initially be negative.
A large mobile investment could be risky for Amazon given the competitiveness of the phone market, Sebastian said.
Apple currently has a market capitalization of $564.61 billion and last traded atnearly $605 a share. Google is at $187.38 billion and closed Friday at $576.52 a share.
Amazon shares last traded up 1.4 percent at $218.39. The online retail company has a $99.26 billion market cap.
“Apple and Google are spending a tremendous amount of money to constantly innovate and bring continuous improvement to their phones and mobile operating systems,” he said, noting that the phone market is very different from the tablet market.
Sebastian said that what Amazon wants to achieve in mobile commerce and content can largely be achieved on phones through well-curated apps. “Tablets, on the other hand, are shopping devices and content consumption devices,” he said, adding that it makes more sense for Amazon to focus on the tablet market instead of the phone market.
Amazon has not confirmed reports that it is developing a smartphone.
“Our conversations with developers suggest that Amazon continues to work on the mobile platform,” Sebastian said. “We don’t have any other specific details on launch timing though.”
Although Sebastian does not have all the details, there is one thing he's certain about: “Amazon is an online retailer, a great technology and cloud company, and we think they should focus on their strengths.”
—By CNBC.com’s Madeline Laskoski
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Robert W. Baird makes a market in securities of Amazon. Colin Sebastian does not personally own the stock.