Jeff Bezos, the founder and CEO of Amazon (AMZN), is known for being eccentric, but his new handset offer may be taking that act a bit too far. Every cellphone that operates on the AT&T (T) wireless network is for sale at Amazon.com today for one penny each.
The only product not available at the remarkable price is the Apple (AAPL) iPhone.
The purchase of the phone has to be made with a two-year AT&T wireless subscription. The phones also come with free two-day shipping.
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Amazon clearly wants to take a lot of business away from bricks-and-mortar consumer electronics operations such as Best Buy (BBY) and the electronics departments at bigger retailers including Wal-Mart (WMT). In the process, Amazon’s program may take traffic away from AT&T’s own retail outlets, something the cellular carrier may not like.
The Amazon move makes one thing almost certain. The prices that consumers pay for handset from the handset companies which don’t have a hot product like the iPhone are going to drop whether the customers use Sprint (S), Verizon (VZ), or AT&T as their carrier.
Amazon won’t be disclosing what it loses on every phone, but its cost to underwrite the program must be considerable. It is a case of losing money on every item and hoping to make it up on volume. That never works.
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Executive Producer: Philip MacDonald
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