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Apple won't lose sleep over Amazon's Fire Phone

Gregg Keizer | June 19, 2014
No one at Apple's headquarters will be losing sleep over whether the new Amazon Fire will snatch market share from the iPhone, analysts said.

Amazon today unveiled its first smartphone, the Fire Phone, at a Seattle event where CEO Jeff Bezos touted the integration between the device and his company's web of services, including the millions of products it sells.

Amazon's Fire phone and its recognition app called Firefly aren't likely to worry Apple execs. (Photo: Amazon)

But no one in Cupertino, Calif. will be losing sleep worrying whether the Fire will snatch share from the iPhone, analysts said.

"No, I don't think Apple has anything to worry about," said Van Baker of Gartner in an interview. "Will the Fire [Phone] steal share from people in the iPhone ecosystem? No."

Carolina Milanesi, chief of research and head of U.S. business for Kantar WorldPanel Comtech, agreed. "iPhone users will stick with Apple," Milanesi said.

Her take was based in large part on the pricing of the Fire Phone, which will be available only on AT&T in the U.S. A Fire Phone will cost $199 (with 32GB of storage space) or $299 (64GB) with a two-year contract — and $649 sans a commitment. While those prices are lower than an iPhone 5S — which starts at $199 for a 16GB device — they're in line with many other non-Apple smartphones.

"If Amazon had come out aggressive on the plan or the price, it would have a bigger appeal," Milanesi said. She had expounded on that theme during Bezos' presentation when she tweeted, "If the $199 on 2yr contract is all there is to Fire Phone pricing it will be a tough sell."

Others echoed Baker and Milanesi in their analysis of the Fire Phone's impact, if any, on Apple's iPhone.

"Most iOS users are incredibly loyal," noted Ezra Gottheil, an analyst with Technology Business Research. "There may be some [deserters], but it will be a small number, probably those who are already committed Prime customers who want the extra benefits of Amazon's phone."

"Not at all," said Jan Dawson of Jackdaw Research when asked whether Apple should be concerned. "It was always going to be a marginal product, one highly targeted at Prime customers. At the price that they launched it, there's nothing compelling about the Fire Phone."

In a longer emailed analysis, Dawson elaborated. "For all the talk about disruptive business models ... this really isn't a very disruptive phone. It acts more or less like any other phone on the market when it comes to the things people use their phones for," Dawson said.

The analysts' repeated references to Prime was a nod not only to Amazon's loyalty reward program, which costs $99 annually for benefits ranging from free two-day shipping to free access to audio and video content, but also to the tight integration between the Fire Phone and Prime. Amazon is bundling a one-year Prime membership — a $99 value — with each smartphone; current Prime customers will have their membership extended by one year.


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