Amazon: Phones for a penny - Top Stocks Blog - MSN Money
 
Search Top Stocks:

Amazon: Phones for a penny

Posted Sep 23 2009, 06:06 AM by Douglas McIntyre
Rating:

Jeff Bezos, the founder and chief executive of Amazon (AMZN),  is known for being eccentric, but his new handset offer may be taking that act a bit too far. Cell phones using the AT&T (T) wireless network were selling on Amazon yesterday for one penny each. If the program is a success it is likely to come back.

The only product not available at the remarkable price is the Apple (AAPL) iPhone.

The purchase of the phone must be made with a two-year AT&T wireless subscription. The phones also come with free two-day shipping.

Amazon clearly wants to take business away from brick-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 handsets from companies that 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.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

Related articles:

More Apple news

500 largest companies

Latest on biotech

Back to Top Stocks Digg this | Email this | Link to this
Comments

 

In countries such as South Africa it's common for handset providers to give the phone away, inclluding top Nokia lines whch retail for $600 in the U.S.A with a contract, as they are making a substantial profit on selling the contract. This should have been done ages ago, but the hand held providers are too greedy.

BH (Posted 09.23.09 7:54 AM) Report Abuse

At wirefly.com they have lots of free phones with a service plan.  I got a $400.00  Palm Centro for free with a 2 year service plan.  I never would buy a phone from a store. You pay the same amount of money for a plan from a store or the internet so why pay for the phone also.  With the high cost of wireless service all phones should be free.

michguy (Posted 09.23.09 8:31 AM) Report Abuse

They have been doing that in Japan for years,with much success.

martiangirl (Posted 09.23.09 9:39 AM) Report Abuse

"Give 'em the razor (the phone) and sell 'em the blades (the coverage plan)."  One of the oldest (and most profitable) marketing plans in existence.

Dave (Posted 09.23.09 10:08 AM) Report Abuse

This is not even new. If you are old enough to remember when Cell Phones first came out, this was almost ALWAYS how it worked.  I'm still amazed at what people will pay for a Cell Phone these days, because I remember when I went through at least a couple of years of trying different phones, and NEVER paid for one. They would always give you a phone to get the contract. It's like one day somebody figured out that there were people who would pay big $$ for the phone as well as the contract.

Sticker Shocked (Posted 09.23.09 10:17 AM) Report Abuse

Actually, several other phones are more expensive - e.g. Blackberry Bold.

Scott (Posted 09.23.09 11:57 AM) Report Abuse

"'Give 'em the razor (the phone) and sell 'em the blades (the coverage plan).'  One of the oldest (and most profitable) marketing plans in existence."

That's tight, Dave, and who started it?

expatinasia (Posted 09.24.09 5:41 AM) Report Abuse

Opps...I meant "that's RIGHT"...

expatinasia (Posted 09.24.09 5:42 AM) Report Abuse

expatinasia... Who started it?  Probably Gillette :-)

But seriously, I remember it from my college marketing classes (long ago).  It's based on allowing the consumer to perceive great value on his initial purchase so he doesn't think about the recurring cost that he'll incur over the life of the product.  (Of course the recurring costs far exceed what he originally saved.)

Dave (Posted 09.24.09 9:46 AM) Report Abuse

Damn..I missed that promo...I was wondering when the penny promo would come back..

james (Posted 09.24.09 5:35 PM) Report Abuse

Send a Comment

Comments must be directly related to the blog entry. Comments with offensive language will be deleted. Your e-mail address won't be displayed.

(please, no HTML tags. Web addresses will be hyperlinked):