McQuivey sees Amazon following a course similar to what it has done with the Kindle tablets -- selling at low prices to drive the purchase of more Amazon content, including books, electronics and streamed films or music. "The Kindle Fire tablet has never gotten significant market share, but for the people who own them, it made them more connected to Amazon," McQuivey said.
Mark Mahaney at RBC Capital Markets said Amazon's strategy for Kindle devices appears to be working. "Kindle device owners spend almost 30% more with Amazon than non-Kindle owners -- $457 per year vs. $361 per year -- (which provides) a bit of an explanation as to why Amazon may be shortly unveiling a smartphone," Mahaney said in a note to clients.
Still, some analysts say Amazon is taking a risk in a new, fiercely competitive, segment of the market. "It's going to be an uphill climb," said Ramon Llamas, a mobile analyst for IDC.
Llamas said a majority of US customers, and many in other parts of the world, already have a smartphone or have considered an iPhone or Android handset. "Consumers are going to want to know how many applications there are," he told AFP.
Amazon uses a modified version of Android, which keeps its system separate from the main marketplace offered by Google. It claims to have 240,000 apps, compared with over a million for iOS and Android, although some Android apps may work on Amazon devices.
Llamas said Amazon may have a hard time getting consumers to switch out of iOS or Android and could face similar troubles as Windows and BlackBerry, whose phones lack a broad ecosystem.
He added that some consumers might want to use an Amazon phone for shopping, but that consumers have a much deeper relationship with their phones.
"It's not shopping all the time," he said.