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Will Amazon Buy webOS from HP? In a Seattle Minute -- For the Right Price

The latest rumor on the mobile front involves Amazon (AMZN), which just spun the mobile world around with its Kindle Fire tablet announcement. According to VentureBeat, the force in e-readers is close to buying the webOS operating system from HP (HPQ), which has already given up on doing anything sensible with the OS other than dumping it.

Some, such as Matt Peckham at the Time Techland blog and Jack Schofield at our sister site ZDNet UK, think the idea is nutty. Throw me in with the optimists for once. This would be a clever long-term move for Amazon, taking it out of danger from Microsoft (MSFT) and Apple (AAPL) and giving it a path to its own ecosystem.

Not another mobile operating system!
Schofield says that Amazon has a big vested interest in Android, having used it as the basis for the Kindle Fire and built a marketplace for the apps. And that is true.

However, Schofield over-emphasizes the importance. Amazon is a retailer happy to sell many competing products. It wouldn't lose focus any more than offering software makes it lose track of books, video, music, or electronics equipment.

Peckham argues that a deal wouldn't make sense because he "can't see a third OS seriously challenging Android or iOS at this point." I think that's short-sighted.

Android is hugely successful, but is also enormously vulnerable to legal challenge, as Microsoft (MSFT) and Apple (AAPL) have both proven. Microsoft has also made headway with vendors such as HTC and Samsung in getting them to work with Windows Phone.

Good heavens, man! What about the apps?!
The mistake that Peckham makes is assuming that control of the operating system choice is in the hands of the consumer. But it's really up to the handset vendors and the carriers. Sure, users might like having a wide choice of apps, but start selling enough units and the app developers will race over, looking for an uncluttered marketing opportunity.

Amazon could quickly build a base by moving the other Kindles to webOS. Because people are primarily interested in using them as readers, it wouldn't affect their choice. Instead, millions of units running webOS would start selling annually, which could be enough to get developers to start porting.

What's in it for them?
That still leaves the question of why Amazon would want its own operating system. One reason might be to avoid paying royalties to Microsoft. Even Samsung has started paying royalties for using Android.

According to at least one analyst, Amazon's $199 price for the Kindle Fire is probably $50 below cost. It's using the device as a loss leader to get people to buy more stuff from Amazon. Tacking on another 10 percent to 20 percent to Microsoft would be painful.

Furthermore, if Amazon could make webOS-powered Kindles successful, it would begin to own an ecosystem the same way as Apple does. And that is a tempting proposition for any company sitting at the corner of High Tech and Media.


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