Amazon is broadening its business to include not just electronic reading devices and tablet computers like the just-released Kindle Fire, but also handheld smartphones, according to Mark Mahaney, an analyst at Citi.

Mahaney says he thinks Amazon will release a smartphone next year that will be customized to work with Amazon’s digital movies, music and e-books and that it could cost less than $200.

The phone may have an 8-megapixel camera, a 4-inch touch screen and an HSPA+ radio that allows for faster data uploading and downloading.

In a note to investors Mahaney did not mention the type of software the phone might run, but in passing he cited a possible “OS royalty to Microsoft.” Microsoft owns patents that allow it to collect royalties from many manufacturers of mobile devices running Google’s Android operating system. The Kindle Fire is one example.

Read more at The Los Angeles Times ^[1].