Yes, Amazon.com (AMZN) will release a smartphone.
No, it won't be soon.
As is its habit, Amazon is treading very carefully into this new market, which is vital as phones become a nexus of purchasing by young consumers. It has bought its own mapping service, hired a patent acquisition expert, and begun talks with Foxconn, supplier of the Apple (AAPL) iPhone.
This last is your tell on how fast Amazon will move. Or rather how slowly.
While Foxconn is theoretically free to make a kit for whomever it wants, Apple is a big enough customer to have a virtual veto on the company's moves with major rivals. Apple may allow Foxconn to supply niches, but it won't let Foxconn give a major rival access to logistics assets it spent billions of dollars to help create.
So while Amazon.com is gearing up, it's probably going to have to find its own suppliers for whatever Android phone it offers. Its purpose in working with Foxconn is likely to learn what it takes to serve the market at a competitive price, with competitive features free from patent attack, and with margins it can live with.
In terms of patents it starts with the base of Google's (GOOG) Android. That's not a perfect base but, based on the decisions in cases brought by Oracle and Apple itself recently, that's not a bad base to start with.
Matt Gordon, the patent guy, will be tasked with filling the holes in an Android phone patent portfolio, which could involve licensing intellectual property from Microsoft (MSFT) or other companies. The only company I would consider buying based on this story, thus, is Research in Motion (RIMM), which is considering splitting itself in two in order to sell patent rights.
Amazon also has to line up carriers, or at minimum a network of re-sellers like Virgin Mobile, before making any announcement. A phone without service is no phone at all.
What this tells me is that you should not expect an announcement before this fall, and should not expect any deliveries before the spring of 2013. Don't play this as a corporate event before then.
Personally, I left my own position in Amazon.Com at the start of the week, and wil re-evaluate after its next earnings report. Its last earnings guidance for the quarter just ended, issued April 26, fell below analyst estimates but the stock ran up anyway. I'm guessing the market won't be forgiving, despite being warned. (Yeah, life is unfair.)