Amazon Fire Phone turns out to be a $170 million flop
In July 2014, Amazon finally launched the highly anticipated Fire Phone, which had been rumoured to be in the works for years. However, despite the initial hype, the actual product quickly gained some harsh criticism and consequently leading to disappointing sales, reports The Guardian. The same newspaper previously estimated only around 35,000 Fire Phone units were sold in over a month after its launch in the US.
Tom Szkutak, chief financial officer of the company disclosed on a conference call with investors yesterday that Amazon is writing off $170 million in unsold inventory of its Fire Phone in its Q3 financial report, solidifying the device as a commercial failure.
The online retailer has made attempts to encourage sales of the device by reducing the price of the phone. The Fire Phone was released through an exclusive partnership with AT&T in the US, and just after two months, dropped from $200 to 99 cents with a two-year contract. However, it did not result in much of an impact. Successful handsets typically sell over a million units in their first month, and Amazon’s struggle further highlights the difficulty of entering the smartphone business, where Apple and Samsung continues to dominate the market.
The smartphone was bought out to join Amazon’s expanding range of devices, which has grown from a single e-reader to tablets, a media-streaming box and the Fire Phone. The smartphone touted the ability to display 3D images and graphics, but most of its other features including the ‘Mayday’ support service and the ‘Firefly’ button are designed just to cater to Amazon’s own services and promoted shopping with the retailer. The heavily altered version of Android along with limited app store also incurred many poor reviews.
The company reported a third-quarter loss of $437 million this week, missing Wall Street expectations whilst warning an also disappointing fourth-quarter revenue. Szkutak noted during the call that the “consolidated segment operating loss includes charges of approximately $170m, primarily related to the Fire phone inventory evaluation and supplier commitment cost.” He also stated that the company still have “approximately $83m worth of [Fire Phone] inventory on hand” and adds that $25 million of the writedown was outside the US.