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All signs point to a new Amazon smartphone

Amazon is expected to make another big bet on mobile by trotting out its first smartphone on Wednesday.

If the rumors are correct, CEO Jeff Bezos will unveil a phone with a screen that displays 3-D images and video. Earlier this month, Amazon hinted at a new device in a video on YouTube that showed people “ooing” and “aahing” at a device, which remained just off camera like some mysterious apparition.

A phone would fill a big hole in Amazon’s line of electronics, which already includes a tablet computer, e-book reader and set top box for television. But introducing a smatphone at such a late date is also a big risk because of the fierce competition of established rivals like Apple, Google and Samsung.

Tech blog Boy Genius Report said that Amazon’s 3-D effects were just “the tip of the iceberg” for its phone. Sources told the site the 4.7-inch device includes an infrared camera along with sensors and software that tracks users’ movements to help them navigate through the screens.

For example, people will see small icons within the phone’s email and calendar apps without any labels explaining their function, the blog reported. To make the labels appear, users will need to slightly tilt the phone. In another example, the blog said that people who tilt the phone after searching for a restaurant in the maps app will see rating from online review service Yelp appear on top of pins plotted on the map.

If true, it sounds like Amazon (AMZN) is trying to do for mobile what Microsoft’s Kinect video game sensor did for the living room by letting users control the device with hand gestures and head movements rather than by tapping icons or clicking on links. Microsoft (MSFT) has sold well over 24 million Kinect devices since it launched four years ago, signaling that people are comfortable using their movements to control technology.

Amazon has already made significant gains in mobile with its Kindle Fire tablets. But a well-designed, competitively-priced smartphone could take the company’s mobile ambitions to a new level. Just 30% of the world’s 5.2 billion mobile phone users have smartphones, according to Kleiner Perkins venture capitalist Mary Meeker, suggesting that latecomers to the market like Amazon still have some hope.

By any measure, Amazon is late. Apple  (AAPL)  and Google  (GOOG) jumped into mobile years ago, a fast-moving market that is unforgiving to late-comers. Take Microsoft, whose first Windows Phone 7 device arrived in late 2010 – roughly three years after the first iPhone and two years after the first Android device. Its global smartphone market share hovers around just 4%, according to ABI Research.

But if Amazon’s smartphone takes off, the benefit to the company could be huge. The device could become yet another window for millions of shoppers to buy products from, watch Amazon’s video streaming service, read Kindle e-books and listen to the company’s new music streaming service. Bezos would achieve his wish: His already-vast empire would swell even further.

Check back into tomorrow at 10:30 am PST/1:30 pm EST for a blow-by-blow account of Amazon’s event.

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