When Amazon entered the tablet space, there were more than a few skeptics. But launching the Kindle Fire made sense: Amazon is one of the world's most efficient retailers, is flush with cash, has significant technical chops and brings a content ecosystem that few other companies can rival.
With all that, it's no surprise that Amazon has found some success with the Kindle Fire, which is now the most popular Android-based tablet in the world.
Amazon's strategy to enter the tablet market led some to raise an interesting question: could Amazon adopt a similar strategy to enter the smartphone market? Indeed, last year, prominent Citigroup analyst Mark Mahaney suggested that Amazon would launch a Kindle smartphone in late 2012.
Was he right? If a new report from Bloomberg is any indication, the answer may be 'yes.' Bloomberg's sources say that Amazon is working with Foxconn -- the same company that manufactures the iPhone for Apple -- on its own smartphone that would run on Android operating system. According to the sources, "Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement," which would be a smart move given how crazy the patent situation has become.
As Wired's Roberto Baldwin observes, an Amazon smartphone makes perfect sense from a business perspective:
An Amazon smartphone would complement the current Amazon ecosystem: All of Amazon’s hardware offerings act as digital storefronts for books, music, movies and TVs shows, and a smartphone tailored to an individual’s unique purchasing habits could be the ultimate vehicle for impulse buys. After all, unlike the Kindle Fire tablet (which sometimes stays at home), an Amazon smartphone would always be in someone’s pocket or purse, ready for action.
With a Kindle phone, the world's largest online retailer would literally be everywhere, giving it the ability to sell consumers stuff -- digital and perhaps even physical -- no matter where they go.
To get its new phone into the hands of consumers, Amazon would have a distinct advantage: as Baldwin notes, the company can subsidize like few others, and regularly does to enter new markets. Amazon also has a potential technology advantage: it uses a forked version of Android with the Kindle and would almost certainly also use a forked version of Android for its smartphone. That would give it a much greater ability to create a better and more Amazon-centric experience that differentiates the Kindle phone from its vanilla Android competitors.
While the spin is that an Amazon smartphone would pit Amazon against Apple, the reality is that if Bloomberg's sources are correct, the biggest losers in Amazon's smartphone push are likely to be Google and Microsoft. The former doesn't profit from Amazon's forked Android strategy, and the latter doesn't need a new player in the smartphone ecosystem as it attempts to grow Windows Phone's profile.