is, indeed, working on its own smartphone to compete with Apple and Google, according to a report from Bloomberg News tonight, citing anonymous sources.

The device would run a modified version of Android, like the company’s Kindle Fire tablet, and Amazon has hired a former Intellectual Ventures executive to get its intellectual-property portfolio ready for the smartphone patent wars.

Amazon isn’t commenting on the report.

The company shook up the tablet market with the $199, 7-inch Kindle Fire, subsidizing the device itself in hopes of selling more movies, music, Amazon Prime subscriptions and other products to users of the tablet. The need to work with wireless carriers could make it tougher to follow a similar approach with a phone. However, the company does have plenty of experience in the smartphone market as a retailer through its Amazon Wireless store.

The report confirms an idea first floated by Citigroup analysts last fall.

“With the clear success of the Kindle e-Reader over the past 3 years, and Kindle Fire possibly succeeding in the low-priced Tablet market, we view this as the next logical step for Amazon,” wrote the analysts, Mark Mahaney and Kevin Chang, at the time.

The move would give Amazon’s corporate neighbor Microsoft more competition for the No. 3 spot in the smartphone market.

Of course, the big question is: Will it have an airbag?

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  • Rick Appleton

    When Google bought Android from Andy Rubin in 2005, then
    gave the world his invention with the Open Handset Alliance in 2007, the move
    appeared to be genius.

    Remember, in the mid 2000’s, open source was considered the
    wave of the future and if you were a cool and forward looking company with a
    tag line of “Do No Evil” then Linux/Open Source was the smart money.

    Now flash to 2012 and it is evident that Google’s smart play
    has gone terribly wrong:

    Google has failed to monetize search at the same
    growth rate and reach as desktop search. The North American mobile market is
    the only success. ROW does not use Google search on Android phones, with China
    being the biggest hole in this strategy.

    95% of Android phones in China have default
    search to Baidu. Google’s search share continues to drop in China to less than
    15% in 2011.

    Amazon (not a member of OHA) has sold 10M+
    Kindles with digital downloads being the single largest revenue source for Amazon’s
    online commerce business.

    Microsoft collected $900M in 2011 from Android
    royalty payments. Estimated to top $1B in 2012.

    Amazon, HTC, and Samsung are the largest Android
    royalty payers to Microsoft.

    Google pays $12.5B for Motorola – a defensive
    move that is dilutive to profits.

    And now Amazon will make an Android mobile phone. And it
    would not surprise if Bing is the default search.

    With all the negative press on how Microsoft lost the last
    decade, why isn’t there any word on how Ballmer rejected the siren song of Open

    Google’s embrace of Open Source for the mobile market has
    proven to be a strategic mistake of enormous proportion. They gave Andy Rubin’s
    genius away and have only got a few extra search dollars in N. America in
    return. Worst they empowered their competition to heights that are still

    • José Carrilho

      I’m not well into these moves, but your point of view is interesting.

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