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Microsoft Welcomes New Amazon Fire Phone with OneNote, Skype Support

The release of the Amazon Fire Phone this week adds another wildcard to the smartphone race largely dominated by Apple's iPhone and devices based on Google's Android OS. With Windows Phone in a distant but solid third place in market share, it remains to be seen if it's too late for anyone to make a serious dent in the market at this point.

Microsoft must believe the new Amazon Fire Phone has a chance of gaining at least some amount of share and as a result is offering its Skype and OneNote apps in the Amazon App Store for Android right out of the gate. Even if the Windows Phone team doesn't see the Amazon Fire Phone as a threat, Microsoft also seems to realize that the new phone's success or failure won't rest on adding apps such as Skype and OneNote. And if the Amazon Fire Phone should prove to be a wild success, Microsoft, which already has acknowledged that we're no longer in an all-Windows world, likely doesn't want its apps and services to be supplanted by others. This move is not without precedent: Microsoft has offered Amazon Kindle apps in the Windows Store since the launch of Windows 7 back in 2009. Amazon also offers Windows Server and SQL Server instances in its Amazon Web Services public cloud

If any new entrant can gain share in the mobile phone market, it's Amazon. But even when Facebook was reportedly floating the idea of offering its own phone, it appears it realized that an apparent single-purpose device was a risky bet. Amazon has more to gain -- its phones are inherently designed to let people buy goods in its retail store. It even lets consumers capture an image of an item in a store and see if they can get it cheaper, which, they more often than not, can. And customers who have an Amazon Prime account, which all new subscribers get with the phone for a full year, can purchase goods with the phone.

Amazon already has experience in the device market with its Kindle Fire tablets with respectable but not dominant share. And Amazon recently launched its own TV set top box. The Amazon Fire Phone, like the Kindle Fire tablets, runs on a forked version of Android that doesn't support apps from the Google Play store. Amazon's new phone introduces some interesting new features including the ability to flip pages in a calendar and other apps without touching the screen but rather moving your hand. It comes standard with 32GB of storage and has the ability to recognize products.

Critics argue some of these "whiz bang" features are nice and some other appealing features like unlimited photo storage in the cloud are also nice touches. But it also it has a relatively basic design and form factor. While I haven't seen the phone myself, it appears it will appeal to those who use the Amazon Prime service extensively. As an Amazon Prime subscriber too, I'll settle for using whatever apps Amazon offers for iOS or Windows Phone when selecting my next phone. 

Amazon has shown a willingness to break even or even sell products at a loss if it will further its overall business goals. On the other hand, with yesterday's disappointing earnings report where its net loss of $27 per share was substantially higher than the $16 loss expected by analysts, it remains to be seen how far Amazon can sustain losses, especially in new segments. Investor pressure aside, CEO Jeff Bezos shows no sign of backing off on his company's investments in distribution centers for its retail operation, datacenter capacity for the Amazon Web Service public cloud and now its entry into the low-margin phone business.

What's your take on the Amazon Fire Phone? Will it be a hot commodity or will it vindicate Facebook for choosing not to enter the market?

Posted by Jeffrey Schwartz on 07/25/2014 at 10:18 AM


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