On June 18, 2014, Amazon (NASDAQ:AMZN) began taking pre-orders for its new line of Fire smartphones, which will be shipped out to United States customers by July 25th. Already, Credit Card Forum President Ben Woolsey has likened the Amazon Fire handset to a "Trojan Horse," in reference to the online retailer's bait-and-switch tactics. From there, Ben Woolsey also went so far as to dismiss Fire device telecommunications features as ancillary to operations.
At best, the Fire will simply serve a niche market of diehard Amazon customers. Most likely, the Amazon Fire phone will fail, and may expose the online retailer to embarrassing asset writedowns, going forward.
Amazon Fire Specifications
In terms of price, the Amazon Fire phone would compete directly against premium handsets out of the likes of Samsung, Microsoft, BlackBerry, and Apple (NASDAQ:AAPL). At this junction in time, Amazon Fire specifications are noticeably inferior to the market leading 5S. Amazon does promote the Fire as the only smartphone with Dynamic Perspective and Firefly technology.
Sebastian Anthony and Extreme Tech, however, promptly dismissed both features as gimmicks. According to Anthony, 3D viewing via Dynamic Perspective offers up limited "peeks" around objects, while Firefly technology may come off as a somewhat shameless attempt to shoehorn consumers into Amazon online sales.
The Bottom Line
Comscore recently published its May 2014 U.S. Smartphone Subscriber Market Share report. A quick review of the comScore report would reveal the presence of a dominant Android and iOS duopoly above the smartphone market. Taken together, both account for 94% of U.S. smartphones through this latest quarter.
The Fire handset will run upon a forked, or highly customized, version of Android. The Fire OS is more so geared toward the integration of Amazon applications, instead of Google software. Extreme Tech has reported that the Fire phone will arrive preloaded with Silk, Amazon Appstore, and Cloud Player -- instead of Chrome --, Google Play, and Gmail. Again, the Fire will more so cater toward a distinct group of Amazon faithful, as it will lack many of the more popular Android features.
Apple is coming off a 2013 fiscal year when it shipped 150.3 million iPhone handsets. Alternatively, Amazon may sell fewer than one million Fire phone units over the course of the next year. As such, The Fire will have little to no impact upon the dynamics of the Amazon business model. Amazon has built its empire upon literally giving product away, in order to spur increased Internet traffic.
Amazon's bait-and-switch tactics, however, have largely failed to materialize as real bottom line growth. Amazon revenue did advance sharply from $34.2 billion to $74.5 billion between 2010 and 2013. Meanwhile, Amazon net income actually declined from $1.2 billion to $274 million, through this same 2010-2013 time frame. For investors worried about profitability, Amazon stock should be avoided as a long-term investment.