Amazon's Tough Call

If Amazon decides to wade into the smartphone business as it has with tablet computers, the online retailer will face a host of new challenges in a cutthroat market.

The Seattle-based company, which has built a name in hardware through its Kindle e-reader and tablet devices, may see some of the same attractions in smartphones such as the possibility of selling digital content for its hardware. But there are major hurdles in the smartphone market. For one, Amazon would face a far more crowded field with entrenched players such as Apple Inc. and Samsung Electronics Co., which has become the largest handset maker in part by using Google's Android operating system. The competition has taken its toll on companies such as Research In Motion Ltd., HTC Corp. and Motorola Mobility, now part of Google Inc. Only Samsung and Apple gained market share in the three months through May, even as the number of people owning such handsets grew 5% from February to 110 million, according to comScore. And rising device costs have rankled some carriers, which agree to subsidize some of the handset costs in exchange for two-year service contracts.