While it's risky, Amazon's Fire Phone could light a spark in your portfolio. The obvious route is to pick up some Amazon shares, but it may be thriftier to consider companies that will benefit from the Fire.
The already crowded smartphone industry is expected to be worth $341.4 billion by 2015. And cellphone makers are constantly trying to stay ahead of the competition.
So when smartphone newbie Amazon.com (Nasdaq: AMZN) announced the debut of Fire Phone that includes a 3-D display, many tech experts were skeptical.
“If Amazon can actually make a 3-D display work in something that appeals to a wide audience, it will crack a problem that the tech industry has had for years—how to get people to actually adopt 3D display technology,” says Washington Post tech blogger Hayley Tsukayama.
It won’t be easy. The industry is no stranger to failed attempts to gain consumer favor, especially with 3-D technology. Cellphone makers HTC Corporation (TW: 2498) and LG Electronics Inc. (KS: 066570) learned that lesson the hard way in 2011.
So what will keep Amazon’s Fire Phone from the same fate as HTC and LG? More importantly, can it change the industry?
Amazon has spent millions building a better mousetrap—and a handsome one, to boot. While it’s risky, we think Amazon's Fire Phone could light a spark in your portfolio.
Building on Amazon’s strength
With 250 million active customers, Amazon is the titan of internet retail. But the company also developed an ecosystem that encourages phone users to utilize Amazon-centric services as often as possible.
Apple users have the Apple Store. Android users have Google Play from Google Inc. (Nasdaq: GOOG). Windows Phone users have Microsoft Corporation (Nasdaq: MSFT). Amazon Fire Phone users will also have access to an electronic marketplace—backed by the largest online retailer on Earth.
That means more money and business for Amazon. Fire Phone also aims to increase impulse buying with software that allows users to purchase everyday items using the phone’s camera. The program, “Firefly,” has been called the phone’s “secret weapon” by tech blogging outlet CNET.
Firefly makes price comparison “a more or less shameless march against every retail store a Fire Phone could ever set foot inside, making the device an Amazon buying machine like no other.”
Investors must have recognized the phone’s potential as well, because Amazon’s shares jumped 3% to $335 after its debut. (Editor’s note: The stock has since come back down, though.)
What it means for competitors
Amazon also announced AT&T Inc. (NYSE: T) would be the sole carrier for the phone.
The addition of the Amazon Fire Phone will surely leave less elbow room for leading handset makers Apple and Samsung Electronics Company Ltd. (KS: 005930). Apple and Samsung have seen combined market share drop 3% due to competition from lower-end Chinese companies.
But the real losers here may be brick-and-mortar stores.
“[Firefly] is potentially a real threat to bricks and mortar retailers,” said Altimeter Group analyst Rebecca Lieb in The New York Times. “Scan a product or listen to music, and you’re delivered straight to the page on Amazon on which you can purchase it.”
How you can invest in it
The obvious route is to pick up some Amazon shares, but it may be thriftier to consider companies that will benefit from the Fire, such as BlackBerry Limited (Nasdaq: BBRY).
Amazon announced that BlackBerry smartphone users will have access to the Amazon App Store. And BlackBerry developers will be encouraged to create apps for both systems. BlackBerry has traditionally been on a downward trend, but is up 8.2% year-to-date.
Amazon’s exclusive agreement with AT&T may make the megacarrier worth looking into as well.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.