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Amazon's Fire Phone Unlikely To Persuade iPhone Loyalists

Amazon's Fire Phone Unlikely To Persuade iPhone Loyalists
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Apple (NASDAQ: AAPL) might not have much to worry about when Amazon (NASDAQ: AMZN) releases its first phone next month.

IBISWorld industry research analyst Sarah Kahn does not believe that Amazon will be successful in persuading many iPhone loyalists to switch to the Fire Phone.

"I think that Apple has a very high retention rate," Kahn told Benzinga. "People who use the iPhone are happy with it and tend to buy the next one. They rarely, or don't as much, switch from iPhone to Android. Android grew a lot by getting new smartphone users -- meaning people who didn't have a smartphone before and are buying their first smartphone."

Related Link: Amazon's Fire Phone Needs Stellar Apps To Beat Apple's iPhone 6

Kahn said that she is "not convinced" that current iPhone users will make the switch.

"The exclusive plan with AT&T, with a two-year contract, is definitely not a plus for them," she added. "We're seeing the market move away from contracts, so I'm not sure how successful that will be."

Ian Fogg, Director of Mobile & Telecoms at IHS Technology, also had concerns about the price and the exclusive deal with AT&T.

"What Amazon is doing with the pricing on AT&T is, unlike the Kindle Fire tablet, which is priced as a value offering in the market, the Fire Phone is a more premium device," Fogg told Benzinga. "It's going head-to-head with the smartphone flagships from established smartphone companies like Samsung and Apple. And that's a difficult sell."

Amazon will sell the Fire Phone without a contract for $649, but that option has been downplayed in its promotions.

"I'm not that sure that it will really change the smartphone market," Kahn concluded. "I think it might get [some individuals] to buy a smartphone for the first time."

If Amazon is successful in that regard, it might actually have what it takes to change the industry by bringing more people into the market. In that scenario, versatile app developers (who are willing to utilize the individual advantages of all smartphones) could be the ones who truly benefit from the Fire Phone's release.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

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