April 14, 2014, 4:25 PM

Game of phones: Will Amazon.com join the smartphone battle?

The e-retailer owns about 10% of the tablet market with its Kindle Fire, and it just debuted its Amazon Fire TV set-top box for video streaming. Is a smartphone Amazon's next hardware foray? Mobile industry observers say it's a "highly credible rumor," and add that an Amazon-branded smartphone could potentially increase Amazon's mobile commerce sales.

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The mobile industry is abuzz about Amazon.com Inc. launching an Android smartphone in June, expanding its hardware line-up that now includes multiple versions of the Kindle Fire tablet along with the new Amazon Fire TV set-top box for video streaming and the new Amazon Dash, a hand-held device with bar code scanning and voice recognition technologies that’s used to replenish items via the AmazonFresh grocery delivery service.

"The Amazon smartphone is a highly credible rumor," says Avi Greengart, research director for consumer devices at Current Analysis Inc., a mobile hardware and telecommunications research and consulting firm. Amazon.com did not respond to a request for comment.

The buzz suggests the Amazon smartphone may include 3-D technology. Integrating the voice recognition technology from the Fire and the Dash also is a possibility. "3-D would be a differentiator, but likely will have little impact beyond giving Amazon smartphone users something to show off to friends," Greengart says. "The newest glasses-free 3-D technologies create a remarkable facsimile of depth, but to date 3-D has not been proven to sell smartphones, cameras, gaming systems or televisions. 3-D can be fun, but I'm deeply skeptical that, by itself, it is something that will generate sales."

While 3-D might not generate sales of an Amazon smartphone, Amazon would surely expect its own branded smartphone to generate mobile commerce sales of digital and physical merchandise for Amazon.com, mobile experts say.

"Amazon won't pin its business strategy’s success on its own branded hardware products," says Harry Wang, director of mobile research at Parks Associates, a technology research and consulting firm. "But owning its own hardware serves several strategic advantages: It enhances branding visibility, retains more loyal customers, better integrates Amazon services and shopping apps with hardware, and gains some leverage with digital content providers, merchants and partners. Overall, Amazon is trying to use hardware to improve consumer perception of the Amazon experience in order to drive revenue growth."

Wang adds that he doesn't expect an Amazon smartphone to gain significant market share, nor does he think Amazon itself would be banking on major smartphone market share, at least in the near term.

"The smartphone market is already highly competitive in developed markets," Wang says. "Amazon can price its smartphone at a very affordable price in order to attract replacement buyers. But otherwise, it will be a tough battle for the e-commerce giant."

Julie A. Ask, a vice president and principal analyst at Forrester Research Inc., says the biggest question is: Why would someone want an Amazon smartphone?

"Consumers today need a number of core and truly excellent sub-platforms on their smartphones: location, wallets, communication, social media, entertainment, commerce and others. Amazon can check a few of these boxes, but not all of them. In my 12 years as a mobile analyst, I can't remember any niche model working—not the Facebook or MS Kin social phones nor the Nokia Ngage gaming phone."

However, Amazon already has a technology, wholly unique in the realm of mobile, that could make an Amazon smartphone really stand out, Greengart says. That would be the Mayday button on its Kindle Fire HDX tablets. A user simply presses the button to be connected for free to an Amazon expert, who appears live onscreen and can co-pilot the user through any tablet feature by drawing on the user's screen, walking her through how to do something herself, or doing it for her. Mayday is available 24/7, 365 days a year.

"Mayday on a smartphone could be very, very interesting," Greengart says. "It could make Amazon's phone the best smartphone for technophobes. Further, Amazon could expand Mayday technical support to help people shop Amazon. Press Mayday for a live sales rep who can help you place your order for aDVDplayer or a lawnmower."

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