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The Fire Phone Has Fizzled

fire phoneYesterday afternoon Amazon confirmed in their quarterly investors briefing what pundits had been saying for months: the Fire Phone has fizzled.

Amazon reported quarterly revenues of $20.58 billion, up about 20% from the same period last year. The retailer says that they lost $437 million last quarter, with a good third coming from a write down on the Fire Phone.

Amazon Chief Financial Officer Tom Szkutak disclosed on Thursday that Amazon had taken a $170 million write down in the third quarter largely related to their unsold stockpile of Fire smartphones as well as supplier commitment costs. The retailer is sitting on $83 million in unsold Fire Phone stock, which means that it is actually possible that Amazon is sitting on more unsold units than they have managed  to sell in the past 4 months.

I know that I snarked about this topic yesterday when AT&T announced they were bundling a $49 Fire HDX tablet with new Fire Phone sales, but damn. That gimmick-packed wunder-phone really isn’t selling.

What’s next, do you think? Amazon already okayed a great bundle deal with AT&T; do you think that will become permanent, and will Amazon offer a similar bundle for an unlocked Fire Phone?

I was all set to get a Fire Phone following news of yesterday’s bundle but as I sat down this morning and priced the monthly cost I lost interest. That bundle looks like a great deal, but it comes with a $60 a month contract. Considering how rarely I would need the smartphone (I do have a landline, after all), that is a lot of money over 2 years – especially when you remember that this is a crippled smartphone.

As Juli Monroe pointed out in the comments yesterday, Amazon’s platform lacks Google apps, and even though the Amazon appstore has most of the apps found in Google Play, " it is missing some of my must-have apps (or was, I haven’t checked recently) like the Starbucks app. Even when they have apps which are available on Google Play, they are often an upgrade or two behind, which annoys me. "

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Ben October 24, 2014 um 8:28 am

Apart from eInk text readers, Amazon’s hardware is always a relative flop. This is just the latest example. They only sell any when then slash prices and (probably) lose money on each one sold. And even then, customers don’t pick them up after a while.

Clearly, interface design for complex and varied tasks isn’t something Amazon can do well. IMHO, the company is only very good at four things: Getting Wall St. to fund them to keep losing money so they can sell hit books at a loss (so other retailers who have to make a profit can’t compete), the regular Kinlde eco-system (which is excellent and a well-deserved win), delivery and customer service.

Nate Hoffelder October 24, 2014 um 8:53 am

I wouldn’t call the Fire tablet a flop. It’s not the best seller but for a limited function media tablet it still has decent sales. And I think you hit the nail on the head with an explanation as to why it has any sales at all: delivery. The reason I like my Fire tablet is the way it delivers Amazon content. As you said, the interface isn’t great but the delivery is.

Until Amazon figures out how to pull that off with the Fire Phone I expect the sales will continue to lack luster.

fjtorres October 24, 2014 um 10:13 am

Amazon tablets a flop?
Some would beg to differ:

And, while it is too early to judge, the FireTV seems to be getting traction.

The problem with the phone is simply that it was too pricey and came out much too late. The thing had been rumored for, what? two years? The higher ends of the phone market are already occupied and most phone vendors are aiming lower. If it had launched at $99 the buzz from the price would’ve moved it. Or at $299 unlocked.

Most of the folks that showed interest in the Fire Phone were turned away the cost and the AT&T deal.

The real question now is do they retreat, like Facebook, or regroup and try again.

Nate Hoffelder October 24, 2014 um 10:21 am

That’s US tablet sales, not global. Amazon doesn’t have that kind of a share globally, and the reason Amazon is holding its own in the US market is the content they can deliver in this market.

Ben October 24, 2014 um 10:36 am

Also, that survey is of units owned, so probably includes loads of Fire’s sold by Amazon at loss-making discounts, or given away by others with phone contracts. I only said 'relative flop', meaning for a company with Amazons resources, which I think is a fair assessment, particularly when you look at usage (actual stats here rather than small surveys extrapolated up):

fjtorres October 24, 2014 um 12:11 pm

No, it’s not global.
None of the Fire products are.

But holding your own against Samsung in any single market is hardly a mark of failure. It’s a house brand tablet, closer to Kenmore in mission than a Sony or Panasonic standalone brand. The phone may have thudded but the tablets have generally succeeded in their mission.

Nate Hoffelder October 25, 2014 um 12:18 am

It’s not a failure, but the tablets aren’t a success either. Their sales can arguably be attributed to the content Amazon can deliver, which means that the tablets on their own (in the absence of the content) are a Fail.

Timothy Wilhoit October 24, 2014 um 9:16 am

I would disagree about Amazon’s hardware being inadequate. I got an HD Fire a couple of years ago and it tends to be a bit sluggish but still works well. On the other hand, the 7″ HDX I purchased 6 weeks ago has been excellent. I had a Nexus 7 (sadly, the screen was broken) and I actually enjoy using the HDX more than the Nexus. I haven’t run across any non-Amazon apps (that I really wanted) that I haven’t been able to load from 1Mobile. As long as the app isn’t roped through Google Services, it works just fine on the HDX. If Amazon does a Fire sale (wince) on an unlocked Fire phone before Xmas, I would definitely get one.

Anne October 24, 2014 um 1:03 pm

I agree with you on the tablet and it seems that most of my family does too. All but one have migrated to the Fire as replacements for their broken iPads or Nexus tablets. I suspect primarily due to price especially because young ones are using them. I don’t think any but one brother uses it to buy Amazon stuff and that’s because he uses it as his primary reader. Mine is usually used for web browsing or music streaming and I’ve taught all the adults how to sideload. AFAIK, they all seem to be happy with how things are going.

I’m not big on apps but I’d rather use Amazon’s store than Google. I always go to Amazon first on my phone and that works for me. Who knows how many updates I must be behind? I haven’t noticed.

I’d at least look at the phone if it were available at my carrier but who knows if/when that will happen. AT&T just doesn’t have coverage around here so it’s a non-starter.

cdnbum October 24, 2014 um 8:55 am

I think this will also have impact on their tablets. They needed a phone to help support their own app store ecosystem since the tablet market is declining in volume. There are a lot of capital costs going into the these hardware products and apps.

Felix October 24, 2014 um 10:01 am

When even your average Internet zombie rejects a walled garden, you know it’s bad. You think they’ll be smart enough to just flash CyanogenMod on them and sell them at cost, unlocked?

Ha ha, as if.

Damn marketers.

ucfgrad93 October 24, 2014 um 11:03 am

Personally, I really like the Fire tablet hardware. It is the awful OS on it that has kept me from purchasing one.

Juli Monroe October 24, 2014 um 12:44 pm

It’s ironic that I predicted it would sell well, even with the limitations. I was way off. I really didn’t think it’s limitations would matter as much to the market I thought would buy it, die-hard Amazon customers.

Oh, and thanks for the quote. 🙂

Thomas October 26, 2014 um 5:22 pm

Most theoretically "die-hard" Amazon customers aren’t loyal to Amazon in any sense; they’re just folks looking for a good deal. If someone else has a better one, they’ll jump ship in an instant.

That’s why It’s nonsense to fear a supposed Amazon monopoly. They couldn’t really exploit one without losing it.

Common Sense October 24, 2014 um 12:51 pm

I love my Kindles, Fires and all, but Amazon is a day late and a dollar short with the phones and TV.

We turned to Roku several years ago when our TV didn’t have Prime on it and have been quite happy with it. Why would we spend yet more money for a device that does the same thing? And we all got new Samsung phones in the spring when we switched from TMobile to AT&T. Even if the Fire phones had been available then, I wouldn’t have chosen them because they don’t have a microSD slot, the main reason I chose Samsung over HTC and the others. I also don’t like how you can’t use Google apps.

Amazon is usually in tune with what customers want but not with these.

Syn October 24, 2014 um 1:15 pm

They should move the phone over to AT&T’s prepaid plan on Cricket Wireless for dirt cheap. On Auto pay its 35 a month for unlimited talk, text and 1gb of data, or 45 for Unlimited talk, text with 3gb of Data and if your a data hog, 55 will get you the same with 10gb of data.

I think Amazon could move stock if it wasn’t tied to a contract. If I’m going to be stuck on a contract, it would be for an iPhone 6+ or a Galaxy Note 4.

Amazon really doesn’t need this tied to AT&T. Its not helping them one bit and there is so much more and better competitors in the phone market. Prepaid still gets them people taking pictures of labels. They don’t need a contract for that.

carmen webster buxton October 24, 2014 um 2:54 pm

I know nothing about the phone, but the smartaleck kids in the commercials were obnoxious as all get out.

tubemonkey October 24, 2014 um 6:13 pm

Time for Amazon to unload these phones:

Step 1 – re-brand them as tablets –> Fire HDX Mini – the pocket Fire
Step 2 – cut the unlocked price to $249 (32GB) and $299 (64GB)
Step 3 – new ad campaign promoting the Fire tablet small enough to always be with you

Ebook Bargains UK October 25, 2014 um 4:21 am

It’s interesting that Amazon should be seeking to use the Fire phone as an excuse for part of the losses just reported. The Fire phone was launched just prior to the Q2 results, and Amazon clearly stated in Q3 it was looking at a half billion loss. That was based on the Fire phone being a huge success.

Given the Fire phone is a public disaster, whereas most Amazon numbers are unknown, it makes sense for them to ride that wagon all the way. But for a better understanding of Amazon’s losses we might want to look st the stock compensation paid to the Board to keep them in line, after three execs jumped ship.

Investors get shafted, employees get shafted, and the Board gets massive bonuses while Amazon claims $200 million tax relief from Uncle Sam for not being able to make a profit.

You couldn’t make it up.

TheGreatFilter October 25, 2014 um 7:55 am

It’s really that bad?

Timothy Wilhoit October 25, 2014 um 8:21 am

Not really. Amazon doesn’t show profits on their books because they don’t feel it’s in their interests, financially speaking. BizNews had an interesting article a few days ago where they looked at Amazon’s numbers from last year and said: "From the net cash generated by operating managers, you deduct interest and then pay the taxman. Last year’s cash profit after interest and tax was $5.3 billion – not the $274 million shown on the income statement." I think it’s pretty clever. They’re limiting their tax liability. Amazon is vast and grows larger every day. When people say "I refuse to do business with Amazon and I do business with their competitor, x" and often they will name a company that is wholly owned by Amazon…that’s funny. My favorite is "I refuse to give Zon a dime for video streaming so I use Netflix!" Netflix is primarily streamed through Amazon Web Services. Much of Amazon is invisible to consumers or their interest is shrouded. Amazon is not having any financial difficulties.

puzzled October 26, 2014 um 4:35 am

"Netflix is primarily streamed through Amazon Web Services."

This doesn’t mean that Amazon has an ownership of Netflix.

Netflix uses a service that Amazon provides.

Timothy Wilhoit October 26, 2014 um 9:09 am

I didn’t indicate Amazon had any ownership of Netflix. Using Netflix does contribute money to Amazon’s coffers, which was my point.

Breaking News: Amazon Attributes Poor Fire Phone Sales to High Price – The Digital Reader October 31, 2014 um 1:45 pm

[…] The hot tech news story this morning comes from Fortune, which reported that Amazon has figured out why they’ve sold so few Fire Phones. […]

Looks like I was right about Amazon’s Fire Phone – Bayou Renaissance Man August 19, 2019 um 5:11 am

[…] It seems I was right about the market response.  The Digital Reader reports: […]

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