Will Amazon’s (AMZN) Entry Into The Smartphone Market Pay Off?
While most investors were focused on the FOMC meeting this week, perhaps the bigger news came from the corporate world. More specifically, online retail giant Amazon.com (AMZN) made quite the statement with its entry into the smartphone market.
In case you missed, AMZN and CEO Jeff Bezos unveiled the company’s brand new Fire Phone. Essentially, the company has officially entered the ultra-competitive smartphone industry currently dominated by Apple (AAPL) and Samsung.
So what does the Fire Phone have to offer? Can it compete with the likes of the iPhone and Galaxy?
First off, technically, the Fire Phone compares favorably with other high end phones on the market. What differentiates the phone in terms of functionality are two main features.
The first is called “Dynamic Perspective” and basically lets you see objects in 3-D without glasses. It’s a neat feature that could change the way apps and games are developed moving forward.
The other, and probably more important feature, is what AMZN calls Firefly. It’s a button that uses the phone’s camera and microphone to recognize products and songs and allows you to purchase them.
Here’s the thing…
How “good” the phone is really doesn’t matter. What matters most is if people use the Firefly feature. AMZN is using its smartphone the same way it uses its tablets… to sell more content. After all, AMZN is a retail company.
Ultimately, the Fire Phone is just another method for selling products.
AMZN does have an advantage over its competition when it comes to leveraging its strengths. For instance, with the Fire Phone (and presumably other AMZN hardware), you’ll be able to store unlimited photos in the cloud, for free. The Fire Phone also comes with 1 free year of Prime Membership.
At the moment, you can only get the Fire Phone through AT&T (T) with a 2-year contract. Like the iPhone, that may change over time.
All in all, the Fire Phone is likely to do very well. Those customers loyal to Amazon (and there are a lot) will likely grab the phone, along with several other technophiles.
I believe AMZN is a long-term buy. Regardless of what the stock does in the short-term, the company has significant upside. Buying long-term call options (LEAP), or even selling longer-term puts could be good strategies at this time.
Yours in Profit,
Gordon Lewis
Category: Breaking News
