Amazon has extended the reaches of its empire once again.

Late yesterday afternoon, news broke that Amazon had acquired Lexcycle, makers of Stanza, a popular e-reader application for the iPhone. Within minutes of the announcement being picked up in the New York Times, the Twittersphere was buzzing with speculation.

So far, what’s known is that Amazon has acquired Lexcycle. And … well, that’s all that’s known for sure right now. No word on the purchase price. More importantly, there remain a lot of unanswered questions as to what this acquisition will mean for the emerging e-book market.

Stanza is one of the most popular e-reader applications for the iPhone and iPod Touch. With a user base of more than 1.3 million, the app outstrips Amazon’s Kindle in market penetration. Last month, Amazon launched a Kindle app for the iPhone, allowing Kindle owners to also read books on their mobile device. However, like the Kindle itself, the app was only available in the United States. Now, with the acquisition of Stanza, Amazon has instant access to a worldwide mobile user base.

The sticky question is what Amazon will do with the Stanza software. To date, Stanza has offered support for open e-book formats. The application reads ePub files (the book format that the publishing industry has been to trying to standardize around) and files not protected with DRM technology.

Amazon, on the other hand, has been building a supply chain around its own proprietary Kindle format. Kindle books can only be read on a Kindle device or with the iPhone Kindle app. So it seems unlikely Amazon will allow Stanza’s continued support of open formats.

Here’s a summary of some of the commentary now circulating:

• Michael Cairns points out that now is the time for the publishing industry to get behind a common e-book standard. If publishers don’t act now while the e-book market is still in its infancy, they will become increasingly powerless against retail behemoths like Amazon.
• Mike Cane provides some compelling analysis on why the acquisition is bad, bad news for the industry.
• Paul Biba shares some thoughts on the acquisition’s negative implications for the “little guy.”
• Karen Templar summarizes some of the big questions the industry now faces.