Report: After Kindle Fire, is Amazon working on a phone?

Amazon looks like its sitting pretty following the launch of the Kindle Fire, with analysts estimating that the tablet could sell as many as 5 million units by the end of the year.

Now, All Things Digital reports, Citigroup analyst Mark Mahaney is putting forth the idea that Amazon is moving far outside its comfort zone of e-readers and exploring the possibility of a smartphone. Mahaney is basing his speculation on reports from Asian supply chain companies that say the company is developing a phone with Hon Hai Industries. (If that name rings a bell, it’s because they also make devices for Apple.)

Mahaney said the phone would be ready in the fourth quarter of 2012.

In some ways, it’s a logical move. Amazon already has a version of the Android operating system that it’s made completely its own for the Kindle Fire. The company also has been expanding its customer services, including Prime and it’s huge cloud business, moving far beyond the digital storefront business that helped it rise to prominence.

In other ways, it makes no sense at all. As VentureBeat’s Devindra Hardawar pointed out in his take on the report, Amazon shouldn’t be working on a phone because it’s an in­cred­ibly crowded field. Android smartphones, particularly, are everywhere. With tablets, there was a clear void in the market for good tablets under $250 that Amazon will be able to eat up. It would be harder for Amazon to undercut the already very low prices (for smartphones, anyway) for basic smartphones.

Related stories:

Innovations: Kindle Fire in the hands of an Amazonian

Kindle Fire: Review roundup

Four titans of tech are racing to be king of digital age

Hayley Tsukayama covers consumer technology for The Washington Post.

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