Big Software Plans for Amazon's Kindle?

Amazon.com's buying and hiring signal that many more Kindle apps may be on the way—plus software to put Amazon books on other mobile devices

By Olga Kharif

Giant online retailer Amazon.com may be plotting a broader foray into software for smartphones.

The company already offers a handful of mobile applications. One lets users of Apple's (AAPL) iPhone read electronic books on their screens. Another lets BlackBerry users snap photos of products in stores, then find similar items on Amazon. Those may be just the start of Amazon's (AMZN) mobile efforts.

In the past several months the online retailer has been expanding its team of mobile engineers. It's also acquiring companies whose products and knowhow could help Amazon turn out new software for cell phones. The goals may be to sell new programs that can run on Amazon's Kindle e-book reader, make Amazon's digital titles available for more devices, and ring up revenue from sales of mobile applications, say several software executives and analysts.

Amazon won't comment on its mobile-software ambitions. "We don't discuss future plans or developments," spokeswoman Cinthia Portugal says in an e-mail.

A push by Amazon into mobile software may make sense. Right now, smartphone users often buy applications from makers of their devices. But that may change if consumers' loyalties shift from smartphone vendors to online stores that supply software for these phones, says Alex Bloom, CEO of mobile-application vendor Handango. "Devices change, and what's hot today isn't necessarily hot tomorrow," he says. "Consumers will shift among devices but maybe stay with one retailer." Handango runs an online PC software store within Amazon's site.

If Amazon can create an online store for Kindle applications that complement the roughly 300,000 e-book titles it already sells for the device, it could beef up profit margins for its Kindle business. Currently, Amazon has to sell seven e-books, many of which are priced at $10, to make as much money as it makes on a sale of one regular hardcover book through its site, according to Jeffrey Lindsay, a senior analyst at Sanford C. Bernstein.

Mobile-App Market May Reach $25 Billion

Amazon could sell 3 million Kindles by 2012, up from 500,000 in 2008, Lindsay estimates. The company, which has long dabbled in selling digital music and movies, may hope to grab a piece of the fast-growing mobile-applications market. Sales of mobile-phone software and related fees could reach $25 billion in 2014, compared with less than $1 billion in 2008, forecasts tech industry consultant Juniper Research.

Another reason for Amazon's interest in software could be to make its collection of 285,000 electronic books, magazines, and blogs available for Research In Motion's (RIMM) BlackBerrys, as well as cell phones from Nokia (NOK) and others that run the Symbian operating system. "They can't keep the Kindle a closed system, because it will attract the attention of regulators" who may question Amazon's hold on the e-book market, says Bernstein's Lindsay.

An executive at one mobile-phone software vendor also says Amazon may be considering making its Kindle mobile bookstore available for a greater range of handheld computers. In March the store became accessible via an iPhone app.

Amazon is using a combination of selective acquiring and aggressive hiring to bolster its position in applications software.

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