When Mel Gibson offers to lose in all the hands in the first 60 minutes of poker in the movie Maverick, no one at the table realizes why. When his 60 minutes are up, he has learnt enough about everyone at the table that he does not lose a single hand after that.
This is not very different from Amazon, when they decided to sell the latest color-screen enabled Kindle for meager or no profits. In my view, they are doing this to make headway into the “three screen” strategy popularized by Apple and Microsoft. Amazon is also uniquely positioned in that all these Kindle devices are “POS” devices for the largest retail store on earth, amazon.com itself. It is irrelevant to Bezos whether Kindle threatens the Apple or Android tablet market, as long as it is able to shake the market up and find its niche.
However, the phone market is also becoming an oligopoly and Amazon should be wondering what else they can do to expand — what could be a better POS device than the tablet? Apple revolutionized (sugar-coated word for destroyed) several industries — books, music, blah-blah-blah — but retail is a different animal — it involved goods that people can touch and feel. What is the ultimate way to enable the customer to buy anything at any time?
I suspect the only thing capable of creating an always-on POS is the phone. With a phone, you could be brushing teeth with one hand and ordering a 65” LED TV with the other. Combine it with the magic of Amazon Prime, one of the most innovative enablers of all times for loyalty-building — you have a tool with which people can buy real things just as well as electronic things and by the way, make phone calls, check emails, play games etc…
Jobs once had said “if you love your software so much, you should make your own hardware”. Google took the opposite approach and created an awesome framework to which several hardware manufacturers make phones. Amazon has to decide now what they want to do — whether to create exclusive marriages with the hardware-only players (Samsung, LG, Motorola) or to create a new business for wilting PC manufacturers (like Dell) or get into hardware manufacturing business. But either way, the days of Amazon Phones are not too far. Unless I am missing something.
PS: I drafted this more than a month ago, but decided not to publish it immediately. And there is already news of Amazon trying to swallow RIM etc…so, my theory could well be true.