Citi: Amazon Planning Its Own (Windows) Smartphone

Online retailing giant Amazon is planning to make its own smartphone in 2012, according to Citi analyst Kevin Chang. The Taiwan-based analyst issued a research note on Thursday that says checks with component makers show that Amazon is working on a cheap smartphone for the Christmas 2012 shopping season, and that it will run Windows Phone, as opposed to Android.

“We view this as the next logical step for Amazon,” Citi’s analyst said in research note, covered by Forbes, “with the clear success of the Kindle e-Reader over the past 3 years, and Kindle Fire possibly succeeding in the low-priced tablet market […] we continue to believe Amazon has now set its eyes on the mobile (and tablet) media and product consumption frontier.”

One would be excused for questioning the report based solely on the notion that Amazon would choose Windows Phone over Android. Amazon has put extensive resources into developing its own fork of Android for the company’s Kindle Fire, and the retailer has also worked hard to have its own online Android app store.

Amazon Windows Phone Mockup

Amazon Windows Phone Mockup

To then introduce a smartphone that doesn’t leverage those resources or pair with its own tablet seems devoid of sense. The point of selling its own hardware is to leverage it to sell more content, both in physical goods and digital content, and splitting its tablet from its smartphone wouldn’t help the goal of selling more of that content.

Nonetheless, Citi is confident in its assessment that the company is working on some kind of smartphone. Analyst Kevin Chang has even put a BOM on the device at between US$150 and $170, and said that Amazon is likely to sell it at cost to carriers in an effort to undercut all the companies that actually know how to build smartphones. Under such a scenario, the device would likely be free in markets that subsidize phones with a contract.

If Amazon does pursue this course, it will be pitting itself against Apple, RIM, and a host of OEMs who make Android and Windows Phone devices. If it goes with Windows Phone, it will also be able to include Google in its list of direct competitors.

Shares of Amazon fared poorly Thursday, though that was likely far more part of the broad selloff than it being related to Citi’s announcement. The stock ended the day at $204.52, down $7.47 (-3.52%), on heavy volume of 8 million shares trading hands.