Sep 6, 2013 · 1 minute

Amazon has long been rumored to be working on a smartphone. It's a logical next step for a company that already offers its own apps marketplace, digital content stores, and Android-powered tablets. Now it seems that Amazon is closer to making the rumors a reality, and it's said to be doing so with a device that could cost consumers absolutely nothing.

According to former Wall Street Journal reporters Amir Efrati and Jessica Lessin, Amazon is working to release a smartphone that will come at no cost to consumers, with or without a contract. Assuming that Amazon can find a hardware partner and make the economics of a free phone work in its favor, that is.

"The free strategy isn’t set in stone and depends on several factors, including Amazon’s ability to work out financial arrangements with hardware partners, said one of the people who is familiar with Amazon’s smartphone effort," Efrati and Lessin write. "This person and others expressed skepticism about Amazon’s ability to pull off a free device."

That skepticism is warranted when one considers that Amazon has yet to offer a free hardware product despite years of producing low-cost e-readers and tablets. Given the company's willingness to delay current profits in favor of long-term growth, the lack of a free Kindle product is the greatest sign that even the revenue-cutting Amazon can't yet make "free" work for new, high-end hardware.

Consider the Kindle. Amazon sells the low-end version of its dominant e-reader for just $69 -- a small amount, sure, but one which is subsidized by advertisements and Amazon's assumption that Kindle owners will spend more money on e-books than they would have otherwise.

Amazon CEO Jeff Bezos told the BBC in 2012 that the company sells the low-end Kindle, like the more-expensive Kindle Paperwhite and Kindle Fire tablets, at cost. Those products are cheaper to manufacture than many smartphones -- Efrati and Lessin write that smartphones often cost $200 to make -- and have yet to reach the $0 price-tag pundits have long argued Amazon desires.

Could Amazon release a free smartphone? Maybe. Is it working to do so? Given the report released today, it wouldn't be surprising for the answer to be "yes." But will we see a free Amazon-designed smartphone before we see a free Kindle? Probably not.

[Illustration by Hallie Bateman for PandoDaily]