Amazon widely expected to unveil its first smartphone

Amazon.com sells diapers, makes Kindles, delivers groceries, streams music and produces its own shows. Has it also become a smartphone maker?

The e-commerce juggernaut is set to launch a new device at a media event in Seattle at 10:30 a.m. PDT Wednesday. Although the company has remained tight-lipped about what it plans to unveil, an Amazon-branded smartphone is widely expected.

A smartphone would be the latest addition to Amazon’s deep arsenal of products and services and would bring together many of those wide-ranging interests in a compact device. In other words, it’s another way to tie consumers to the company.

But Amazon faces a major battle to get the attention of consumers, who have overwhelmingly settled on Apple or Samsung phones and have spent years downloading apps and personalizing their devices.

The odds of a third player breaking through, as Microsoft has learned with its Windows Phones, is a long shot even for companies with deep pockets. The once-ubiquitous BlackBerry has all but disappeared during the last few years.

According to ComScore, 167.9 million people in the U.S. owned smartphones during the three months that ended in April. Apple was the No. 1 smartphone maker, with 41.4% of the market. Samsung followed with 27.7%.

LG, Motorola and HTC rounded out the top five, each with market share in the single digits.

“It’s a really tough space,” said Julie Ask, an analyst at Forrester Research. “But the prize is also really big. There’s no doubt mobile phones are becoming the primary engagement point for consumers.”

Analysts have speculated that Amazon would heavily subsidize the cost of a smartphone to hook customers. It’s a well-known tactic Amazon uses with its e-readers and tablets: pricing the devices low with the expectation that the company will make up the cost via sales of content. With a relatively cheap smartphone, Amazon could be hoping that users turn to the device to make more Amazon.com purchases and consume more Amazon content.

“An Amazon smartphone would be less about profiting from device sales per se and more a way to pocket a larger share of multiple revenue streams, such as mobile retail sales, mobile content and advertising,” said Cathy Boyle, a senior analyst of mobile at eMarketer.

Although the U.S. market for mobile shopping is growing fast, it still remains relatively small. Which means it may be hard for Amazon to entice people to buy enough on their phones to justify a heavily subsidized phone.

More likely, analysts said, is that an Amazon smartphone would simply be another bet by the company on the long term. Investors have grown accustomed to the company investing heavily in its business and showing little or no profits in the short term.

In addition to winning over consumers, Amazon would also need to persuade developers to build apps for its smartphone.

The Seattle-based company might be more attractive as a platform because it has already launched the Amazon Fire TV and Kindle Fire tablet, Ask said. Those devices use a customized version of the Android operating system, so developers will have some familiarity with it and may be enticed by the Amazon brand and its existing family of devices.

But if the phone is too different, developers might not believe it’s worth the time and investment if the user base is not very large, Ask said.

Analysts also guessed that Amazon might try to incorporate its popular Prime membership program in some way, perhaps by including a Prime membership free with the purchase of a phone. Many expect distribution for the phone will be limited at first and might possibly be sold exclusively at Amazon.com.

In terms of features, the Amazon smartphone is rumored to come with a screen that can display 3-D images.

Even if the phones sell terribly, or the company loses money on each one, investors might continue to cut the company some slack.

“The amount of money Amazon gets from selling hardware is probably just a rounding error for them,” Ask said. “This could just be an exercise for Amazon to experiment and learn.”

Amazon’s event is being held at Fremont Studios in Seattle. It will not be livestreamed online to the public. Check back at our tech blog, Technology Now, after the event for product details and photos.

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