What I want from a Kindle smartphone

The latest buzz around the rumor mill is that Amazon is working on a smartphone that will launch in the fourth quarter of 2012, but can such a device succeed in today's competitive market?

Analysts at Citigroup say that based on supply chain checks, Amazon is in talks with Foxconn to develop a handset that could feature a Texas Instrument OMAP 4 processor and cost between $150 to $170 to build. Citigroup notes in its report (PDF) that a smartphone would be the next logical step for Amazon after seeing success with its Kindle e-readers and its recent foray into the tablet market with the Kindle Fire.

Analysts aren't the only who think this; in fact, CNET executive editor David Carnoy made this prediction a month ago, and I'm of the same thought that a Kindle smartphone isn't so much a case of if, but when.

Whether you agree or disagree, for the sake of argument, let's say that a Kindle smartphone is coming. The question then becomes what can Amazon do to make its handset stand out from the rest and convince customers to choose it over the latest iPhone, Android or even Windows Phone device?

Well, it won't be easy, but I can think of a few ways it can get ahead.

Pricing
When it comes to shopping for tech gadgets (or anything for that matter), price is a huge factor, and it's one of the reasons the Kindle Fire is receiving so much attention. Is it the best tablet on the market? Absolutely not. However, the $200 price tag is more attractive and manageable to people, compared to something like the iPad 2, which has an entry price of $499. Plus, you're still getting one entertaining device for the price.

This is the company's modus operandi--"premium products at nonpremium prices" as Amazon CEO Jeff Bezos puts it. Amazon has already shown a willingness to take a slight loss on each Kindle Fire, and there's no reason to believe that it would change its strategy for a Kindle smartphone.

Citigroup believes that it will cost Amazon between $150 to $170 to build the smartphone, and analysts say that the company could sell the device to carriers at or near cost. This is, in contrast, to other OEMs (original equipment manufacturers), such as HTC, who would price the smartphone at $243, in order to make 30 percent gross margin. Meanwhile, carriers pay $600 and upwards for the iPhone.

What this all means for you is that you'll probably be able to get the Kindle smartphone for really cheap, most likely free, on contract. The thing is, nowadays you can a number of smartphones for free when signing a two-year agreement. Of course, they often come at the cost of some features, so Amazon will need to make sure that it's offering something the others aren't in order to entice customers.

There are actually a number of ways Amazon could go with pricing. Some, such as Dan Frommer, contributing editor at Business Insider and founder and editor of SplatF, have pondered a scenario where Amazon actually pays you to use the phone and special offers play a role, while Harry McCracken, founder and editor of Technologizer and CNET contributor, daydreams of hassle-free wireless service plans from Amazon.

Me? I would really love to see Amazon sell its smartphone unlocked at an affordable price. Today, unlocked smartphones cost a few hundred dollars but if Amazon could manage to sell them near or at cost and free customers of contracts, well, that would be huge.

Hardware
Though an affordable price tag is key, it's also important for Amazon to not skimp on the hardware. Today, customers are demanding that their smartphones have the latest technology, and to really take advantage of some of Amazon's services, there are a few things the smartphone will need to have.

It's already rumored that the handset will feature a dual-core TI OMAP 4 processor, which promises such benefits as high performance and low power consumption, PC-like browsing, and 1080p HD video capture and playback.

I'd also like to see at least a 4-inch display to make watching videos and reading books on the Kindle smartphone worthwhile, and I want to be able to download and stream content over 4G in case I can't access a Wi-Fi network. A good camera is a must-have, and though Amazon's cloud service can make 8GB of internal memory enough for the average user, 16GB of internal memory (or even expandable memory) would be better.

Of course, good battery life and the ability to make calls are also at the top of the list.

I know Amazon isn't a hardware company, but it can't lose sight of giving its customers a solid and functional smartphone.

Services and content
Amazon already has a leg up in this department with its vast selection of music, video, books, and magazines. As with the Kindle Fire, I imagine Amazon will tightly integrate its services into the smartphone, making it easy for users to consume new and old content right on their device.

This includes being able to stream your media from Amazon's cloud servers and all-you-can-stream Instant Videos, access to the Kindle Lending Library, and free two-day shipping for Amazon Prime customers. Non-Prime subscribers should also get the same perk as Kindle Fire buyers of getting a 30-day free trial of the service.

As CNET tablets editor Donald Bell notes in his Kindle Fire review, Amazon's services do not suck, and it will be one of the key differentiators if the company does come out with a smartphone.

Operating system
To be completely honest, I'm on the fence on what Amazon should do here. The easiest and most logical thing for Amazon to do is to keep using Android as its primary operating system. It's already developed a user experience around it and has its Appstore for Android.

However, for partly selfish reasons, I would love to see Amazon snatch up WebOS and build a smartphone experience around it. Not only would the company get a nice portfolio of patents, Amazon would also be able to integrate WebOS's great multitasking abilities and contact management system into its smartphone. Yet, as David Carnoy points out Amazon would need to convince developers to create apps for the platform, and the company may not interested in making that investment.

If Amazon continues to go the Android route, I do think the company is going to have to make some vast improvements to the user interface. I've been tinkering with the Kindle Fire, and though sleek looking, I've found the user experience to be, at times, clunky, unintuitive, and frustrating. Make key controls accessible all times (finding the home screen button shouldn't be a game of hide and seek). There's a way to be both beautiful and simple.

Wait and see
A Kindle smartphone makes sense for Amazon, but it would also be a huge risk. With such a device not expected till the next holiday season, that gives the competition a lot of time to come out with bigger and better things. I'm sure my thoughts on what would make a Kindle smartphone successful will change a few months from now, but I'd love to hear your thoughts on this.

What would make you buy a Kindle smartphone?