Amazon Phone, Potential iPhone Rival, Could Be In The Works, According To Report

With its $199 Kindle Fire, released in November, Amazon has already taken a hefty chunk of tablet sales away from Apple. Could Amazon be planning the same undercutting strategy against the iPhone?

According to a fresh and lively report from Bloomberg, Amazon is "developing a smartphone that would vie with [Apple]'s iPhone" (and other smartphones too, presumably) and is currently loading up on the requisite patents necessary to enter the smartphone business. Amazon's iPhone (aPhone?) could be ready by the end of 2012, or about a year after its disruptive Kindle Fire hit the market, per a report from Citigroup's Mark Mahaney from November of last year.

Though Amazon does not release firm numbers, most analysts estimate it sold about 6 million Kindle Fires in the first quarter after the device's release, which would make the Kindle Fire the second best-selling tablet ever, behind Apple's iPad. The Kindle Fire was inexpensive ($199, compared to $499 for the cheapest iPad) and easy to use, two attributes that could define the success of any smartphone entry from Amazon.

Details of the supposed Amazon phone are scant, though presumably it would easily connect with the storefront and Amazon App Store. Amazon also recently acquired UpNext, a 3D mapping service it could use on the Kindle Fire or its new smartphone.

But how will Amazon attract phone buyers? With the Kindle Fire, Amazon seemed to be selling to those who had never owned an iPad, or could not afford one; but the tablet market was far more untapped than the current smartphone market. How does Amazon entice Android, Windows Phone or iPhone owners away from their current mobile devices of choice?

Like the Kindle Fire, expect an Amazon phone to be cheap. Amazon already has a wireless section on its website, where it sells several popular Android and Windows Phone devices at steep discounts. And we're already seeing a trend of flagship smartphones selling for less than the customary $199 with two-year contracts, with the Nokia Lumia 900 and Sony Xperia Ion starting at $99. Sprint also recently announced that it would offer the white-hot Samsung Galaxy S III for $149 after rebate. Any Amazon phone would likely continue that trend.

What else Amazon can do to seduce smartphone buyers is a mystery. A February survey from Baird Equity Research found that just over 40 percent of consumers would be interested in an Amazon smartphone, should Amazon make one (compare that to 12 percent for a Facebook phone), so the brand image is already there, to some extent. And now we play the waiting game, to see if Amazon CEO Jeff Bezos and company do indeed attack Apple on the smartphone front.

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