(AMZN) Amazon.com Expands Hardware Range

E-commerce giant Amazon.com, Inc. (AMZN) intends to manufacture a television set-top box (STB) to stream video content, according to Bloomberg.

Amazon’s set-top box will feature Amazon’s online video offerings, including Prime Instant Video, and on-demand video service, which includes newfilms and TV shows. The company expects to launch its own STB by the end of 2013.

The e-commerce giant is dependent on other devices like game consoles, digital video recorders and Blu-ray players to stream its expanding video content. The new STB could help Amazon build its own brand name and broaden its range of hardware products, including tablets, electronic readers and smartphones.

Amazon has been rapidly expanding its efforts in the video arena to compete with Netflix Inc. (NFLX), Hulu LLC and others. Lately, the company has been developing its own original series and beefing up its Prime Instant Video service through major licensing agreements. The new STB will provide access to Amazon’s expanding video services, which also include the Amazon Video on Demand store.

Amazon has done exceptionally well in new fields like cloud computing and tablet computers. Despite being a late entrant to the STB market, Amazon is likely to succeed on the back of its innovative ideas. We believe the company’s promotional techniques and strengths will come into play to expand the reach of its set-top boxes.

However, competition will be fierce, with most of the large technology companies foraying into similar Internet-based video programming businesses. The company will compete with Apple Inc. (AAPL), which already sells its own set-top box called Apple TV.

Amazon’s new device would also compete with products from Roku Inc. and Boxee Inc., as well as gaming consoles from Microsoft Corp. (MSFT) and Sony Corp. (SNE) that deliver video programming.

Amazon is one of the leading players in an extremely fast-growing market. In the first quarter, Amazon’s earnings were well ahead of the Zacks Consensus Estimate of 10 cents. But revenues of $16.07 billion were down sequentially as well as from the year-ago quarter.

Amazon currently retains a Zacks Rank #3 (Hold).
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