Why Amazon looks to revive revenue growth with a new smartphone
Amazon could launch a new smartphone on June 18
Recently, Amazon (AMZN) released a video on its website inviting press and customers for its June 18 event in Seattle. The video seems to suggest that Amazon could launch a new smartphone during the event, which would mean Amazon will join Samsung (SSNLF) and Apple (AAPL) in the highly competitive smartphone market. Despite being highly competitive, the smartphone market provides growth opportunities to smartphone vendors, as according to IDC, the global smartphone market could grow from 1.0 billion units in 2013 to 1.7 billion units by 2018, at a compounded annual growth rate (CAGR) of 11%.
Amazon will need to come up with a truly revolutionary product at an attractive price point to succeed in this market. According to a report from the Wall Street Journal in April, Amazon will hope to distinguish its phone with a screen capable of playing three-dimensional images with special glasses. The phone would employ retina tracking technology to make some images appear 3D.
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Amazon looking to revive revenue growth by entering into new markets
Amazon has traditionally competed with eBay (EBAY) in the e-commerce market. The company’s revenue growth from its services segment has more than doubled compared to its revenue growth from its product segment, as the chart above shows. However, over the years, Amazon has experienced slowing revenue growth both in its product sales and services sales. To revive this growth, Amazon is looking to expand its portfolio of products and services by entering into new markets. In addition to the upcoming smartphone, in April this year, Amazon announced the launch of Kindle Fire TV, a set-top box to compete with Apple TV and Google (GOOG) Chromecast devices.
Amazon could also enter into the growing music streaming market to revive its growth. Market Realist published an article on this topic titled Why it makes sense for Amazon to enter the music streaming market, in which we discussed why it does make sense for Amazon to enter this market because the company already has a digital music store in Amazon MP3 service, which lets users purchase individual songs and albums, similar to Apple’s iTunes Store. However, the digital music sales market declined 6%, while the music streaming service market grew 32% in the last year, so Amazon should enter this growth area through its music streaming services.