Amazon's mobile ambitions grow

By Alistair Barr

SAN FRANCISCO | Mon Jul 23, 2012 7:02am EDT

(Reuters) - Amazon.com Inc (AMZN.O) plans to expand its mobile platform and broaden its offering of devices beyond e-readers and the Kindle Fire tablet, analysts, developers and retail partners said ahead of results next week from the world's largest Internet retailer.

Amazon is to introduce up to five or six tablet SKUs, or stock-keeping units, according Demos Parneros, president of U.S. Retail for Staples Inc (SPLS.O), which sells the Fire.

The tablets will be different sizes, including a 10-inch model, Parneros said. Amazon spokespeople declined to comment on the company's plans.

Amazon is making its own tablets to help the company sell more digital goods, such as MP3s, movies, TV shows, apps and games. Physical versions of these products, such as CDs and DVDs, were a big business for Amazon, but they are now in decline.

Having its own devices sitting atop a software platform that offers digital content to more than 100 million, credit-card-wielding customers already programmed to buy, could help Amazon become a major mobile platform player, challenging Apple Inc (AAPL.O), Google Inc (GOOG.O), Microsoft Corp (MSFT.O) and Facebook Inc (FB.O).

"You're seeing the Apple play book recreated by everyone else who wants to play in the mobile device ecosystem. Amazon is the latest entrant," said Niccolo de Masi, chief executive of Glu Mobile Inc (GLUU.O), which develops mobile games for the Fire.

"The Kindle Fire is off to a great start," he added. "We will be supporting all new devices that have promise. They are trying to build on the foundations they have."

DATA = SMART PHONE?

Amazon launched the seven-inch Fire in September, so the company has almost a year of data on the spending habits of these tablet owners. If they have increased purchases of digital goods through the device, that may embolden Amazon to introduce other devices, such as a larger, more expensive tablet and even a smart phone, analysts and others said.

"Amazon will keep working on this path of providing mobile devices and tablet devices," said Giordano Contestabile, an executive at PopCap, a unit of Electronic Arts (EA.O) whose games include: Plants vs. Zombies, Bejeweled and Peggle on the Fire. "We're all waiting," he added.

Purchases of Amazon e-books surged after the company introduce the Kindle e-reader in 2007, Citi Research analyst Mark Mahaney said.

"If a device can do that to their oldest, stodgiest category, imagine what else can benefit from a smart phone," he said. Mahaney's Taipei-based colleague Kevin Chang told Citi clients in November that an Amazon smart phone would be launched in the fourth quarter of 2012.

Amazon is expected to report second-quarter results on July 26. During a conference call after first-quarter results in April, Evercore analyst Ken Sena asked what traction the company was getting from the Fire and what the thinking was around a Kindle smart phone.

Amazon Chief Financial Officer Tom Szkutak dodged the smart phone question, but said the Fire was spurring purchases of "a lot" of digital content.

"We are very pleased with what's happening," the CFO added.

Since the Fire came out in September, Amazon's share of the video market has climbed to 13 percent from 10 percent, according to The NDP Group. In music downloads, Amazon's share rose by one percentage point to 14.4 percent, NPD data show.

"They haven't grown exponentially but that's a healthy gain post the Kindle Fire," said Russ Crupnick, senior entertainment industry analyst at NPD.

LAB 126 GROWS

Recent job postings by Amazon's Lab126 research and design center in Silicon Valley suggest the company is working on new mobile devices that will run on wireless carrier networks.

Gregg Zehr, a former hardware developer from Apple and Palm, heads Lab126, which is based a short drive from Apple's headquarters in Cupertino, California.

Lab126 had just over 500 employees listed on the LinkedIn (LNKD.N) professional network in September, when Amazon launched the Fire. That has grown to 865 as of mid-July , including 792 in the San Francisco Bay Area, according to LinkedIn. An Amazon spokesman declined to comment about Lab126.

"Amazon's Lab126 development center has grown a lot and has a pretty enormous staff now - much more staff than is needed to handle a few e-readers and the Kindle Fire tablet," said Robert Brunner, founder of Ammunition, which has helped Barnes & Noble (BKS.N) design its Nook devices.

"They are there to develop other devices," said Brunner, who helped develop the first Kindle e-readers. "Knowing what I know about Jeff Bezos and Amazon, it's likely they are doing a smart phone."

Seven job postings by Lab126 in recent months sought hardware and software engineers who have experience with cellular products including cell phones and smart phones.

One posting for a Hardware Validation Engineer told candidates they may be responsible for adhering to carrier requirements for Lab126's products.

Another for a Field Quality Engineer said candidates would coordinate with carriers to fix problems. "Prior wireless or related field test experience that covers smart phones or smart devices a plus," Lab126 added in the job posting.

"That clearly means they will put out a device that needs to function on carrier networks," Brunner said. "They are either planning on building that functionality on to tablets or a smart phone."

'WATCH OUT WORLD'

Ed Liljegren, a hardware developer from Apple and Nokia (NOK1V.HE), joined Lab126 in May 2011 and became a manager of Emerging Technology in April, according to his LinkedIn profile.

He described his new job as "Future Concept Development. Watch Out World for what we are doing next!" Liljegren added on LinkedIn.

Amazon also hired two Windows Phone managers from Microsoft in recent months, according to their LinkedIn profiles. Robert Williams is now director of Amazon's App Store and Brandon Watson is director of product management for Kindle Cross Platform.

In early June, Watson blogged about his first few months at Amazon.

"I'm lucky that I get to work on a product that I really love, and loved before coming on board," he wrote. "I can't really say much about some of the things on which I am working. I can say that the goals of some of the teams are huge. Huge."

Watson then recounted what an Amazon senior vice president told him during the recruitment process.

"He said, 'the goal of Kindle was to enable a system to allow someone to buy any book ever published, and have it delivered anywhere in the world in 60 seconds. It's time to think bigger.'"

Neither Liljegren, nor Watson, nor Williams returned calls or emails seeking comment.

(Reporting By Alistair Barr and Dhanya Skariachan and Malathi Nayak; Editing by Leslie Gevirtz)


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