After much fanfare, the release of the Amazon (AMZN) Fire phone was met with a collective yawn from consumers. Now that Apple (AAPL) is ready to drop their latest goliath phone, Jeff Bezos and company have slashed the price of their offering to just 99-cents with a two year contract.
“The way Bezos looks at it is you’re gonna pay him 99-cents to become a customer of his in every way that he conceives of that,” says Yahoo Finance’s senior columnist Mike Santoli. “You’re gonna be a Prime member and buy a lot of stuff. He sees that as just customer acquisition mechanics, not necessarily ‘I’m selling you a piece of hardware for 99-cents.’”
Amazon Fire Phone | FindTheBest
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Like Apple and Google (GOOGL) before them Amazon is just trying to get new customers locked into their ecosystem. If they succeed, the money might flow from customers buying music, movies, or just about any of the actual products available through their site.
In addition, as Santoli points out, “you’re gonna be moving a lot of data through that system, you’re gonna be giving them a lot of data in terms of your transaction habits.” That data has proven a valuable commodity as well.
It all boils down to one fact: the Fire phone doesn’t really matter that much because it’s not really their business.
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So what can Amazon investors glean from all this? Santoli says “there could be a mismatch between Bezos who sees things as being really early in this process…[while] the market may be seeing it as ‘hey you guys are really big already, time to start letting the profits flow.’”
It doesn’t mean long-term trouble for the stock necessarily but Santoli believes it could mean more hiccups for the stock as the competition among Amazon, Apple and Google plays out, which could try Wall Street’s patience with Amazon’s heavy-spending ways.
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