Will Amazon Abandon Its SmartPhone Strategy?

First Samsung, then Sony, now Amazon is pointing to dismal smartphone sales when explaining disappointing quarterly earnings.

Just 3 months ago, at an Apple inspired media event, Jeff Bezos proudly announced Amazon's new "Fire Phone" as a technological marvel that would transform consumer behaviors.

It seems like that plan is not coming to fruition just yet.

Amazon just took a $170 million write-down on the Fire Phone, equal to $0.36 per share, explaining a significant part of the overall -0.95$ loss.

It also disclosed that it had $83 million of units in unsold inventory. 

Using an un-subsidized price of $450, back of napkin calculations indicate that they could have 5-600,000 unsold units whereof 380,000 units were written off. 

Conclusion? It is simply not selling and in response, Amazon dropped the price for a two-year contract to just $0.99.

With the jaw dropping demand for iPhone 6/6 Plus, Apple has turned out to be a fierce competitor and many consumers may simply prefer not to mix their Amazon.com shopping activities with their choice of phone. 

Jeff Bezos may choose to continue the Fire Phone production line as one of many expensive hobbies, but shareholders thirsty for profits are breathing down his neck...

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Comments

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Frank J. Williams 6 years ago Member's comment

Amazon is great at many things, but they'll never be able to put a dent in iPhone sales. Especially when pretty much everything they offer on the Amazon phone, you can get as an app on the iPhone (Kindle app, Amazon Instant Video app, etc.). Amazon's stripped down OS can't compete with iOs or Android.

Joe Black 6 years ago Member's comment

Amazon is always in it for the long game. And the company excels at intertwining their offerings to add value to consumer. You can buy the Fire phone for under a buck with a free year of Prime now - a great incentive to the millions of Prime users who are up for renewal, and maybe hesitant to renew.

Like the Kindle, the company can afford to take a loss on the phone... and make it up in e-books sales, and more prime users (Prime members spend WAY more than other customers).

Johnny Bleiss 6 years ago Author's comment

I agree and i really like Amazon and use it a lot. I do however understand the shareholders who are eager to see some profits... they need to be very focused in their execution and not divert attention away from their core business.