3 Reasons Amazon's Fire Phone Isn’t That Hot

The Fire Phone isn't like the Kindle and Amazon investors need to understand the differences.

Jul 16, 2014 at 10:30AM

Amazon.com (NASDAQ:AMZN) introducing the Fire Phone was supposed to be a huge win for the company and another industry for the company to disrupt. Unfortunately, the device and pricing doesn't match the way Amazon has disrupted other industries before. In fact, there are three issues facing the adoption of the Fire Phone and if investors are hoping for huge profits from this device, they may want to reconsider.

Blurry vision
If Amazon were facing just Apple's iPhone lineup, this might actually be an easier fight. The Fire Phone has a 4.7" display and 315 ppi. Both of Apple's iPhone devices have a 4" display with a ppi of 326. Of course, the iPhone arguably has the superior ecosystem and has a huge lead in smartphone sales.

However, Amazon's Fire Phone isn't necessarily in a battle with the iPhone. The first issue with the Fire Phone is, it faces significant headwinds from its Android competition and even from newer Windows phones when it comes to display quality.

Look at the Google (NASDAQ:GOOG) Nexus 5, the Fire Phone pales in comparison. The Nexus 5 has a 5" display, but its ppi is much higher at 445. The flagship of Samsung the Galaxy S5 has a 5.1" display plus a 432 ppi. Though Windows Phone isn't as popular of an operating system as Android or iOS, Microsoft's (NASDAQ:MSFT) Nokia Icon also has a 5" screen with a ppi of 440.

As you can see, if customers are comparing the screen quality of the Fire Phone to many of its competition, the Fire's display looks blurry in light of its competition.

Features or benefits?
When it comes to selling, a good salesperson focuses on the benefits to the user and not the features. The second issue facing the Fire Phone is, Amazon's Firefly technology sounds interesting on the surface, but it's questionable whether users will see this as a benefit or just a feature that Amazon hopes they want.

Firefly gives users insight into music, movies, and more. While the Fire Phone has a dedicated Firefly button this looks like more of a feature than a benefit. Being able to identify text on posters and magazines, seems like something Amazon thinks users will like rather than solving a real problem.

By contrast, the competition gives users technology that either enhances the smartphone or solves a problem. The Nexus 5 offers Google Now, and with this service users can just say "OK Google" to send texts, find photos, and more. This service gives users the power to get things done that they need to take care of every day.

The Nokia Icon's camera is the smartphone's defining feature. Compared to a 13 megapixel shooter on the Fire Phone, the Icon carries a 20 megapixel camera. This increased megapixel camera plus a PureView Zeiss lens gives the user a reason to potentially leave their expensive camera at home.

Facing competition that solves easily definable problems, the Fire Phone's Firefly technology seems like a weak competitor.

This isn't the Kindle
The third problem facing the Fire Phone is Amazon's pricing. With a price of $199 with a 2 year contract, or as much as $649 without a contract, this puts the Fire Phone on par with some of the highest-end smartphones on the market.

The difference between the Fire Phone and Amazon's previous venture into hardware (the Kindle lineup) is all about price. The reason users could be interested in the Kindle was price. The Kindle was cheap enough that it offered a significant price advantage to the iPad or even the original iPad Mini.

However, the Fire Phone is priced to disappoint investors. As we've seen, other superior hardware can be had at the same price with or without a two year contract. It may be tough for users to justify spending $199 on the Fire Phone when they could buy a Samsung Galaxy S5 or Nokia Icon for a similar price.

Where Amazon is at a serious disadvantage is against the Nexus 5. Google prices the Nexus 5 at $349 for a 16 GB model or $399 for a 32 GB model. With no contract, these aggressive prices mean users can buy a Nexus 5 for 38% less than a 32 GB Fire Phone.

Whether it's price, screen quality, or benefits to the customer, the Fire Phone has serious competitive problems. If investors are hoping for blazing sales, they may want to throw some cold water on these expectations. The Fire Phone doesn't look that hot.

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Chad Henage owns shares of Microsoft. The Motley Fool recommends Amazon.com and Google (C shares). The Motley Fool owns shares of Amazon.com, Google (C shares), and Microsoft. 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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