Will You Buy a Kindle Phone?

Amazon.com (NAS: AMZN) has barely stepped into the tablet market, and before the e-tail king even had a chance to take off its coat, speculation has now turned to the prospect of Amazon entering the smartphone ring.

Citing the customarily ambiguous "channel checks," Citigroup analyst Mark Mahaney is igniting the idea of a Kindle Phone. Mahaney attributes the channel checks to Citi's Taipei-based hardware research analyst, Kevin Chang, and pegs a time frame of Q4 2012 for a possible introduction in time for next year's holidays.

Mahaney believes that Amazon has tapped Foxconn as the manufacturer, who also makes many of Apple's (NAS: AAPL) iDevices and is also rumored to make the next Kindle Fire. He also thinks there's a good chance that Amazon will sell it close to cost, in the ballpark of $150 to $170. That would be a similar strategy to that used for the Kindle Fire, with estimates that the Fire costs between $210 and $250, resulting in an upfront loss of between $10 and $50.

Can Amazon push its way into an already incredibly crowded and saturated smartphone market?

There have been rumors that Amazon may be at the bidding table to take webOS off Hewlett-Packard's (NYS: HPQ) hands, but that strikes me as a particularly terrible idea with webOS's track record. The Fire runs Google (NAS: GOOG) Android, making it a natural step to put the OS on a Kindle Phone. Mahaney even notes that Amazon may need to pay Microsoft (NAS: MSFT) an "OS royalty," which would bolster Mr. Softy's list.

The prospect of a Kindle Phone makes a lot of sense, especially if Amazon plans to undercut the market in the same way and sell the device remotely close to its cost and make it up afterward in content sales. The company has already been building an Android ecosystem and the Fire is drawing in developer interest that rivals initial developer interest in the iPad, according to a recent survey by Appcelerator.

This rumor has some legs to stand on, as long as webOS stays out of the picture.

What do you think? Would you buy a Kindle Phone? Share your thoughts in the comments box below. Don't forget to add Amazon.com to your Watchlist while you're at it.

At the time this article was published Fool contributor Evan Niu owns shares of Apple and Amazon.com, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Google, Microsoft, Apple, and Citigroup. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, Amazon.com, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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