Measured by a full fiscal quarter, the Amazon Fire phone burned $170 million out of the e-commerce company's coffers and is pushing the company to double down on what works.
Amazon launched its Fire phone at the start of its last fiscal quarter, priced at $199 on contract and packed with features it hoped would compete with the likes of Apple's iPhone series. To bolster the Fire phone's launch, and possibly to its detriment, Amazon partnered with AT&T to offer the smartphone exclusively through the wireless carrier.
Only two months into its release, Amazon slashed the on-contract price of the Fire phone to 99 cents. The price cut was much like the phone's entry into the smartphone market: late in coming and lackluster in reception.
As Amazon reported its earnings fell shy of the mark for the quarter that ended on Sept. 30, and the Fire phone and its $170 million charge all but cemented the smartphone as a flop.
Amazon reported a $437 million loss all told, though no other product or service negated the e-commerce company's third-quarter earnings as much as its venture into the smartphone market. At the end of its third quarter, there were still $84 million in unsold Fire phones in Amazon's possession.
"Poor demand for the Fire phone likely contributed to the revenue miss and certainly accounted for the earnings miss," Pacific Crest Securities analyst Chad Bartley said to clients. "Results were disappointing, but much less so excluding the Fire phone."
For Amazon CEO Jeff Bezos and company, winter is coming and it's time to focus on the customer service experience -- and part of that effort may include a new home in midtown Manhattan, expected to open just in time for the holiday shopping season.
"In addition to our already low prices, we will offer more than 15,000 Lightning Deals with early access to select deals for Prime members, hundreds of millions of products across dozens of categories, curated gift lists like Holiday Toy List and Electronics Holiday Gift Guide, new features like #AmazonWishList, and a great new lineup of products like Kindle Voyage and Fire HD Kids Edition," said Jeff Bezos, founder and CEO of Amazon.com. "And if you order your gifts on AmazonSmile, we'll donate a percentage of your purchase price to your favorite charity."
Despite the Fire phone sitting unsold on warehouse shelves, Amazon reported its third-quarter net sales where up 20 percent, $20.58 billion, year over year. The company's net loss was $437 million in the third quarter, or 95 cents per diluted share, compared with net loss of $41 million, or 9 cents per diluted share, in third quarter 2013.
