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How Will The Amazon Smartphone Compete?

|Includes:, Inc. (AMZN)

Amazon (AMZN - Analyst Report) is widely expected to unveil a smartphone on Wednesday. This move would be the latest in a series into hardware for the online retailer/tech company.

AT&T is reported to be the exclusive carrier.

For the last few years, the high-end smartphone market has been dominated by Apple (AAPL -Analyst Report) and Samsung , which have an estimated combined market share of 50-60%.

So how will Amazon differentiate itself in this competitive field?

Many people are speculating that Amazon's phone will have 3D capabilities. That's neat, but 3D has yet to catch on with consumers in other areas. 3D televisions, for instance, have widely been considered a flop.

What else would an Amazon smartphone need to drive customers away from Samsung or Apple?

Perhaps a lower price. That's arguably how the Kindle Fire has managed to carve out its niche in the tablet market, which has an estimated 7-8% market share. Amazon seems to have no problem selling its hardware at a loss to attract users who ultimately buy products/content from its website. My guess is that its smartphone will be no different.