Amazon’s Fire Phone: Modest Pricing and Great Features

Today, Amazon.com, Inc. (NASDAQ:AMZN)’s CEO Jeff Bezos unveiled, at Fremont Studios in Seattle, the company’s first smartphone: the Fire Phone. The device has a 4.7 inch screen, which is smaller than a few of the leading Android phones (like Samsung’s Galaxy), but larger than Apple Inc. (NASDAQ:AAPL)’s iPhone. “We built it from 4.3 inches to 4.5 and picked 4.7 inches for one handed use,” Bezos said as he presented the phone.

The device runs on a Quad core 2.2 GHz processor, has a 2GB RAM, an Adreno 339 Graphics Processor and a dual-sided glass display. Esthetic details are clearly not as important to Amazon as they are to Apple, so the phone basically looks like a black rectangle. However, a few details were taken care of, like magnetized earbuds that do not tangle, and a screen visible in the light. Moreover, it is not the looks that interest fans the most; it is, in fact, the phone’s no-glasses 3D-like display and its multiple cameras that are making most headlines.

The Fire Phone comes with a 13 MP rear-facing camera, and its pictures can be saved, for free, in Amazon Cloud.

Still, the Fire Phone will be modestly priced, as it is usual with Amazon products (probably in the hope of hooking up customers and recuperating revenues through online sales later on). The device will be sold for $199 for 32GB, $299 for 64GB, with a 2-year contract at AT&T Inc. (NYSE:T), or $649 unlocked. It will ship in late July.

But, why is a retailer like Amazon trying to get into the highly contested smartphone market –you might ask? Well, it turns out that the company has been quite affected by the fact that many customers have been having trouble acquiring goods (especially Kindle books) using iPhones or Samsung’s Galaxy phones. A phone of its own will allow Amazon to solve this problem while avoiding sharing the revenue with its –now- competitors.

What’s really interesting is the Firefly feature, quite similar to the Dash. Firefly allows users to scan barcodes and products (just take a picture of the product!) and add them to their Amazon carts.

Nonetheless, path dependency is an important factor when introducing a new product in the market. Most users are already familiar and fond of their –already customized- Android and Apple phones. So, one question still remains: will Amazon be able to penetrate a market already controlled by two companies? Or will it face the same fate as Microsoft Corporation (NASDAQ:MSFT)?

In spite of the uncertainty, Amazon seems willing to take the risk, as smartphones continue to become an essential part of consumption.

Disclosure: Javier Hasse holds no position in any stocks mentioned.