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Amazon smartphone expected at ‘device launch event’

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado on July 23, 2008.

RICK WILKING/REUTERS

Of the handful of technology giants battling to build the most appealing all-in-one digital ecosystem – Apple, Google, Microsoft and Amazon – only one hasn't tried its hand at building a smartphone.

Until now.

Amazon.com Inc., the world's most powerful online retailer is widely expected to enter the ultra-competitive smartphone market this month, after announcing a "device launch event" at its Seattle headquarters scheduled for June 18.

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Given the company's history, Amazon is unlikely to try to generate any profit from selling the phones. Instead, as with all other Amazon hardware, a smartphone would likely act as yet another gateway to the company's sprawling digital storefront, where consumers can buy books, movies and just about everything else.

"Amazon is playing a very different game than its competitors," said independent technology analyst Carmi Levy. "It's all about coming up with new ways for existing and projected customers to interact and buy things online."

Officially, Amazon has not even confirmed what sort of device it intends to announce this month. The extent of the company's media blitz has been a single cryptic promotional video showing a number of everyday users (or actors portraying them) looking in amazement at a gadget in their hands – the gadget itself is kept out of view.

However, the video hints that the device is able to track the movements of a user's eyes. That has led to widespread speculation that the suspected Amazon smartphone will use cameras and other hardware innovations to allow users to interact with the device without using their hands. For example, the phone's user interface may give its owner the ability to shift through multiple desktops by shifting their focus, or tilting the device in a particular direction.

There is also a good chance the company will use the rest of its massive business empire as leverage, adding perks such as large cloud storage lockers to differentiate its smartphone from myriad similar devices already on the market. Indeed, some observers have even suggested the company may offer up the phone for free to customers who subscribe to Amazon's Prime program, which offers speedy shipping and access to media content for an annual $100 (U.S.) fee. Such a move would essentially mirror the business strategy employed by many telecom carriers, who offer phones at steep discounts – on a long-term contract.

"Amazon will happily lose money on every device sold because it knows it will make it back and then some over the life of the device," said Mr. Levy. "It's the old razor analogy – you give the thing away almost for free and make the money back on the blades."

So far, Amazon shareholders appear pleased with news of a device launch. The company's share price jumped more than 5 per cent on Thursday, partly counteracting a malaise that has lasted much of this year. Having hit a high of more than $400 a share in late January, Amazon stock has been on a steady decline since then, currently hovering around $323.

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In recent years, as Amazon's digital goods – music, movies and books – have experienced much more rapid growth than its physical offerings, the company has fought bitterly not only to expand its digital products, but also to procure those products at the lowest possible price. That strategy has led to friction with many of Amazon's content partners, specifically in the book publishing world.

But Amazon itself has also been under growing pressure from investors to finally squeeze some profit from its growing retail empire – despite being the world's leading online storefront, the company rarely turns a profit, instead choosing to focus on reinvesting in infrastructure and development, including the construction of a sprawling network of shipping wearhouses. Should Amazon follow the same low-price strategy it employed for its Kindle tablets, the company's anticipated smartphone may become another example of its history of prioritizing the expansion of its business over the drive for profit.

"I think [an Amazon smartphone is] going to push the envelope a little in terms of innovation," said Ronald Gruia, director of emerging telecom at Frost & Sullivan.

"It's just up to Amazon shareholders, whether they have patience for more losses."

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