The 3-D Phone: Will It Help Amazon and Hurt Apple?

A new phone from the e-commerce giant is intended to boost content sales.

Jun 13, 2014 at 8:00AM

The rumors are flying. E-commerce giant Amazon.com (NASDAQ:AMZN) has scheduled an event for June 18, and those in the know claim the company will be announcing the release of a smartphone, but not just any old phone -- one with a 3-D display, too.

Will a phone move the needle for Amazon, and will investors of other smartphone manufacturers like Apple (NASDAQ:AAPL) and Samsung (NASDAQOTH:SSNLF) be affected?

It's all about content
The 3-D aspect of the phone is probably a gimmick; users wouldn't buy it just for that. Most likely, Amazon wants to use the platform to boost revenue from digital media. To help in that effort, a special data plan is to be created for browsing the company's own content.

Revenue is not a problem in Seattle, as the company has been consistently growing the top line for some time now. The issue, however, is that earnings have not followed suit because Amazon has been reinvesting excess cash back into the business. But, investors have been satisfied with that, and the share price has been climbing. However, the company will probably need to focus on the bottom line at some point. 

AMZN Chart

Source: AMZN data by YCharts

Will a smartphone pay off for Amazon, or will it turn out like the company's relatively unsuccessful foray into tablets?

Market share and shipments of Amazon's Kindle series are declining, and the company ranks well behind leaders Apple and Samsung. The company will have to reverse that trend for a new phone to succeed. 

Idc

Shipments in millions
Source: IDC 

Trend is bigger
Growth in the tablet market has slowed recently, and one reason is that smartphones with larger displays, or phablets, such as the Samsung Galaxy Note 3, might be eating into sales of devices like Apple's iPad Mini. So, if Amazon's new phone has a big screen, it may help things. If the device is priced right, it might affect Samsung. 

Apple also recognizes this turn of events and, reportedly, the next version of the iPhone, due out in the fall, will feature a bigger screen alongside other enhancements. Sales of the Galaxy S5, Samsung's latest flagship device, would be affected by an improved iPhone. So, will the iPad Mini eventually disappear?

The next battleground will be on your wrist
Besides smartphones and tablets, the next battleground for these three companies is likely to revolve around smart watches. Samsung already has already released a wearable device, but the Gear hasn't been a good seller and reviews have been generally poor. Apple is rumored to be aggressively working on one, readying it for a fall release. A bigger iPhone and the new "iWatch" would be a formidable combination sure to benefit investors. There has been no news from Amazon on this front, however, but the company would be wise to consider developing a wearable device if wants to compete with the big boys.

Foolish conclusion
Amazon is reportedly going to announce a smartphone soon, and rumors indicate it will feature a 3-D display, which is probably just a gimmick. More important to investors might be screen size -- the bigger the better.

Apple will probably release an iPhone with a beefed up display in the fall. Combined with the long-awaited smart watch, it will surely boost shareholder returns.

Samsung could be pressured on two fronts: on the high end by new iPhone technology, and on the lower end by Amazon's prices. Investors should pay attention to what happens over the next few months. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Mark Morelli owns shares of Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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