Outlook for Amazon Smartphone Murky

The rumor that Amazon was going to build a smartphone has been around for some time. However it has returned and gained new momentum of late, with the recent acquisition of 3-D mapping service UpNext. And an article last night from Bloomberg seems to confirm that Amazon will introduce a handset or handsets -- made by Foxconn, the company that makes the iPhone and iPad:

Foxconn International Holdings Ltd., the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said

Let's now assume that Amazon is making a smartphone -- a Kindle smartphone -- what is the outlook for such a device? One would assume, like Kindle Fire, that it will be built on a highly customized version of Android, with the same type of Amazon content integration as seen on the Amazon tablet. 

The Kindle Fire was a sales success because of the strength of the Amazon brand and channel and the inexpensive price tag ($199). Amazon's brand won't be as much of a factor in the smartphone arena. An Amazon smartphone will have to compete on the strength of its features and on price. It's hard to imagine that Amazon will be able to compete on price because many Android phones are already very cheap or free (carrier subsidized).

Content (as in Amazon books, movies and music) also doesn't factor as significantly as a differentiator on smartphones it as potentially does on a 7-inch tablet. What matters on smartphones is the availability of apps. There's already a Kindle app for iPhone and Android; so users already have access to much of Amazon's content (though not cloud-based music or movies). And the Amazon app store is an incomplete version of Google Play (the Android market). In other words, the competitive advantages that helped drive Kindle Fire sales don't exist at all or won't exist to the same degree in a smartphone context. 

The only way I could see an Amazon smartphone succeeding vs. other Android phones or the iPhone is if the phone were absolutely top-of-the-line and Amazon were practically giving it away (sub-$100). Otherwise I think we'll see a tepid response by consumers.

Beyond this, depending on what kind of finally shows up, I'm sure Amazon will be pulled into the maelstrom of mobile patent litigation.