Amazon's Fire Phone has already proven to be an embarrassment but Amazon officially takes the cake with disappointing third fiscal quarter report that says the e-commerce company is forced to take a $170 million writedown for its failed smartphone.
In a conference call with investors on Thursday, Amazon chief financial officer Tom Szkutak said the company had to take up to $170 million in charges relating to inventory commitments on Fire Phone. Although Szkutak declined to mention sales figures, he said Amazon currently has $83 million worth of unsold Fire Phones sitting in its warehouse.
In June, Amazon CEO Jeff Bezos had this to say about the Fire Phone, originally sold for $199 on a two-year contract exclusively with AT&T: "Our job is to build the greatest device we know how to build." However, just a couple of months after it was launched to fanfare, the Fire Phone saw its price drop to almost free or 99 cents. Now, Szkutak isn't as enthusiastic as Bezos, describing the Fire Phone as "a good device in a very competitive market."
"There are a lot of reasons it failed, but the key is that Amazon provided no good reason for consumers to buy it," says analyst Avi Greengart at Current Analysis.
Foremost among these reasons is the fact that the Fire Phone was too steeply priced to compete with other smartphones in the same price range. Originally sold at $650 off contract, the Fire Phone was lacking in certain features that were all available in other devices, with nothing but Amazon's hugely modified version of Android and a very limited app store. Amazon did try to make up for the phone's shortcomings, though, by adding Amazon Prime and a gimmicky feature allowed four cameras to create 3D-like images on the smartphone, which unfortunately wasn't enough for the general public to buy into.
Amazon also added Firefly, a feature that lets users add items to their Amazon shopping cart simply by taking a picture of them. But for all Amazon's praises of its own technology, Firefly just seems to be just another creepy way to get people to buy things.
Bezos, however, is unfazed. The Wall Street community's patience is wearing thin on Amazon's policy to reinvest its profits back into its business, but portfolio manager and investment advisor Jon C. Ogg of 24/7 Wall Street says the Amazon chief has "hardly done anything to address that this is a serious disappointment."
During the company's conference call, Bezos was keener on discussing the upcoming holiday shopping rush than anything else.
"As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever," he says.
