Generally, there are two ways to pitch a new device. You can either tout an experience, or boast a list of interesting features and add-ons. Amazon.com (NASDAQ:AMZN) took the latter path in pitching the new Fire Phone, and it's aiming directly for the Samsung (NASDAQOTH:SSNLF) Galaxy S5.
On the surface, this looks like a no-contest. Fire Phone boasts a faster quad-core processor, plenty of RAM, a 13-megapixel camera and a high-definition 3-D display. All improvements over what the Samsung Galaxy S5 offers. And yet I don't see the Fire Phone crimping S5 sales anytime soon.
Carrying too much of the load
Not because the Fire Phone lacks panache or is too expensive. To the contrary, at $199 with a two-year contract the device is priced about in line with most other high-end smartphones. So what's the problem? Amazon's exclusive distribution deal with AT&T, which limits the potential customer base. So much for challenging the worldwide sales channel for the Samsung Galaxy S5.
In its press release, Amazon doesn't specify its reasons for choosing AT&T over others. Money surely had something to do with it. But the very fact that the e-tailer took this route means that the S5, available through all four major U.S. carriers and in 125 countries, isn't going to face much heat from the Fire. We can say the same for the iPhone, which launched similarly all the way back in 2007.
What the touchscreen was to Apple's first iPhone, Firefly is to the Fire Phone. What's Firefly? A camera-powered shopping system that recognizes any product, instantly, in hopes that you'll buy more from Amazon. More than 35 million songs and 70 million other household items are catalogued in its database. Cool but not exactly awe-inspiring, especially when the handset looks, well, pretty much like every other handset out there. I doubt we'll see many switchers.
Maybe it won't matter. Maybe Amazon will be content to own a small slice of the smartphone market in the same way the Kindle Fire tablet accounts for a small portion of the tablet market. Maybe it's enough to have some devices that sell high-margin digital product from time to time.
Either way, Samsung can rest easy knowing that its worldwide distribution network will keep the Galaxy S5 perched near the top of the smartphone sales charts -- no matter what else Amazon does.
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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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