Amazon.com Inc. (AMZN) jumped into the smartphone market with a handset called Fire Phone that is closely tied to the Web retailer’s other services, ramping up competition with Apple Inc. and Samsung Electronics Co.
Amazon Chief Executive Officer Jeff Bezos said at an event in Seattle today that Fire Phone, which is black with a rubber frame and 4.7-inch display, will give consumers direct access to other devices and services from the company. The handset features 3-D viewing and image-recognition technology to make it simpler for users to buy items from Amazon’s Web store. The phone will start at $199.99 and be available on July 25, with AT&T Inc. as the wireless carrier, the company said.
“You have to be patient, you have to work at it and you have to obsess about the smallest of details,” Bezos said at the event, referring to Amazon’s hardware approach. He said he had been asked for years when Amazon would have a phone, and waited until the company could roll out something unique.
The introduction continues Amazon’s evolution from online book seller to global technology titan with its hands in a growing number of businesses. The world’s largest online retailer has debuted a variety of consumer electronics devices, including e-readers, tablets and TV set-top boxes, as a way to get its online store and digital services more directly in front of customers.
Amazon shares rose 2.7 percent to $334.38 at the close in New York, leaving them down 16 percent this year.
Fire Phone will join Amazon’s ecosystem of devices so that when a consumer is watching a movie using the company’s set-top box, the phone can pull up the actors and other information about what’s being viewed through the IMDB service that is owned by the Web retailer. The smartphone will also give customers access to Amazon’s “Mayday” technology-help service.
The handset’s image-recognition technology, called “Firefly,” will let the device figure out what a customer is looking at so the user can buy the item online. It can recognize more than 100 million items, with consumers simply taking a picture of a book, DVD or other product to link back to Amazon’s store. The phone will also have audio recognition for movies and TV shows, which Amazon also carries.
“I’m going to buy a whole lot more things with this technology than I ever have before,” said Ralph De La Vega, head of AT&T (T)’s mobile business, at the event.
The 3-D viewing capabilities give images a deeper perspective and will work on apps like maps or when shopping through Amazon’s store, the company said. It will create a more immersive experience for programs like games. Motion detection technology in the phone also lets people scroll through Web pages and books, or quickly access certain features by tilting the device.
AT&T, the second-biggest U.S. mobile-phone operator, will be the exclusive carrier for the new smartphone. The arrangement is reminiscent of AT&T’s 2007 deal to be the sole carrier of Apple’s iPhone, which boosted the carrier. Verizon Communications Inc. later started selling the iPhone in 2011.
A Fire Phone with 32 gigabytes of memory will cost $199.99 with a two-year wireless contract, while a 64-gigabyte version will cost $299.99. The phone was listed at $649 without a contract on Amazon’s website.
The smartphone gives Amazon a way to feature its online store and digital services for games, mobile applications, movies and music on the computing device people take with them wherever they go. Instead of having its app among the hundreds of thousands available through Apple’s App Store or Google Inc.’s Play store, Amazon’s services are the centerpiece of the new device.
While Amazon has used this strategy with its Kindle Fire tablet and Fire TV set-top box, the smartphone market is a much larger opportunity. According to researcher IDC, the number of smartphone users worldwide is quickly approaching 2 billion.
Yet the handset industry is an increasingly complicated market to navigate. The devices generated sales of $338.2 billion last year, up 21 percent from 2012, according to IDC. Much of the growth has been coming from developing countries like China, where local manufacturers like Lenovo Group Ltd. (992) and Xiaomi Corp. are gaining popularity. In the U.S., where Apple and Samsung are the biggest players, growth is slowing.
Apple is anticipated to release iPhone models with bigger screens later this year.
“Just surviving, let alone prospering, in the mobile handset business will take a multiyear commitment on the order of Amazon’s investments in public cloud infrastructure through its Amazon Web Services unit,” said Julie Ask, an analyst at Forrester Research Inc.
Amazon has shown a willingness to trade near-term profits if it can lure new customers. Of its $19.7 billion in sales last quarter, the company generated $108 million in net income, or less than 1 cent of profit for every dollar of revenue. Beyond consumer electronics, Bezos is spending to expand in the grocery business and building data centers filled with servers that are rented by a growing number of companies.
Companies willing to spend heavily aren’t assured success in the smartphone market. Apple and Samsung are the only companies profiting in the global smartphone market, according to Canaccord Genuity Equity Research.
Amazon’s smartphone introduction comes as other parts of its business face scrutiny. The company is embroiled in contract negotiations with media companies including Hachette Book Group and Warner Bros. over the cut of sales of certain products, resulting in limited inventory of some titles. The U.S. Labor Department also has investigated deaths at the warehouses where Amazon’s products are stored and distributed.
“The most important thing that we’ve done over the last 20 years is earn trust with customers,” Bezos said at the event. “We’ve worked hard to do that.”
Earlier today, BlackBerry Ltd. also said its smartphone customers will gain access to Amazon’s app store, which has many programs that BlackBerry users can’t currently download. The move goes into effect this fall when the Canadian smartphone maker releases its BlackBerry 10.3 operating system.
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