Having seen what Apple, Microsoft and Google have to offer, the tech world is now eagerly awaiting the next move from Amazon.com (AMZN) while the financial world awaits its July 23 earnings announcement.
While we wait, it might do well to review Amazon.com's business model.
I call it the Amazon two-step: We do something involving Internet commerce better than anyone else. Then we let others use it.
Long before it launched its EC2 cloud services, Amazon was letting other companies use its logistics infrastructure. When the taxman cameth, Amazon not only built an engine for computing and paying sales tax, but began offering this as a service to other merchants.
So Amazon first builds infrastructure for its own use, sells it, then re-sells it.
In the case of telephony, Amazon understands that this is a rich Internet client, not primarily a phone. The difference between a Kindle Fire and a phone is not as great as you suppose. Most of today's calls are Voice Over Internet Protocol, or VOIP, at some point in their travels, and this includes cell calls.
What skeptics of Amazon's strategy fail to understand is that the Kindle line isn't about apps. It's about putting the whole Amazon store, and experience, into customers' hands. You don't just buy electronic books and movies on the thing. You also buy clothes and headphones on it. It's not an app store in your hand -- it's the entire shopping mall.
We don't know exactly how much Internet infrastructure Amazon owns. We know it has data centers. We can guess it owns some dark fiber. But it could also be buying core connectivity very cheaply on the open market. If it couldn't, the company would have gone after Level 3 (LVLT) before now. And for voice service, it probably won't need to go into the AT&T (T) or Verizon (VZ) store either. Simply set up as a reseller through Sprint (S). It won't exactly be competing with the iPhone -- more likely it will be routing calls through a network Amazon.com controls. Because that's how the two-step works.
What does Amazon lack? Software! So rather than depend on anyone else for that, it will build its own.
Point is that when investors buy into Amazon.com stock, they're buying all of this. They're not just buying an e-commerce engine, logistics, and a mobile strategy.
You're buying the whole Amazon two-step.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I used to hold AMZN, but I'm expecting a downdraft before getting back in.