Amazon writes off $170 million due to weak Fire Phone sales, posts greater loss than forecast

Amazon writes off $170 million due to weak Fire Phone sales, posts greater loss than forecast
Amazon, as popular and pervasive as it is, has almost always run extremely lean profit margins from its business. The business model has worked and enchanted investors for years, but today’s quarterly financials may have tarnished that luster for a while.

Amazon had already been forecasting a loss for the quarter, about 74-cents per-share on $20.84 billion in revenue. Instead, Amazon posted a net-income loss of $437 million on $20.58 billion, which represents about a 95-cent per-share loss.

Needless to say, Amazon’s stock took a beating in the after hours, down roughly more than 10%, which is an improvement from falling better than 20% earlier in the afternoon. Contributing to that gloomy situation was Amazon’s weaker-than-hoped forecast for the holiday shopping season too, $27-30 billion, well below industry analyst hopes of $31 billion.

The elephant in the room was Amazon’s Fire Phone, which has not been selling well. Amazon announced that it was sitting on $83 million of phone inventory which certainly equates to several hundred thousand devices sitting on a shelf. That inventory caused Amazon to take a write down of $170 million for “inventory evaluations and supplier commitment costs.”

AT&T is the exclusive carrier for the Amazon Fire Phone in the United States, and while it could be argued that was part of Amazon’s problem, the reality is that the device just did not bring enough to the table, not least of which was an "in-your-dreams" price tag of $200 on-contract, quickly adjusted to 99-cents soon after launch.

Amazon will feel the sting near-term, and hopefully learn the lesson from playing in the smartphone game, a far different animal from the company’s successful line of tablets. One of those tablets, the Kindle Fire HDX 7, will be available with AT&T starting tomorrow at a special price – a price that is only available if you also buy a Fire Phone.


sources: re/code and Yahoo! Finance

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21 Comments

1. HugoBarraCyanogenmod

Posts: 1412; Member since: Jul 06, 2014

Phones from the West are always inferior compare to here, not surprise for the outcome from Amazon

5. willard12 unregistered

Maybe if Amazon provided a live rabbit cell phone case you'd like it.

15. sgodsell

Posts: 7573; Member since: Mar 16, 2013

I wanted this phone, but its only sold in the US. Not to mention its being sold for $449, and its locked to AT&T.

2. sun0066

Posts: 282; Member since: Feb 12, 2011

Amazon it is a nice company ,and their products are of very good qualities ,but are too focus to amazon own interest and for that reason limited ,it would be better for then to make products that may act as fully capable phone and tablets even if thet have like special editions of Amazon apps (Kindle ,amazon shop ,etc )

3. Muayyad

Posts: 240; Member since: Oct 05, 2012

Develop a full android system and add free kindle services, they will sell.

4. shnibz

Posts: 517; Member since: Sep 18, 2011

Yeah I love Amazon.com... but I don't know a single person who owns or has any remote Interest in owning the Fire Phone.

16. Doakie

Posts: 2478; Member since: May 06, 2009

I'd buy one if they sold it off contact for $250... :-/ I'd at least give it a try...

20. seret6

Posts: 279; Member since: Aug 14, 2013

Doakie my man, u are willing get ripped off Honestly speaking this phone sholud be sild at $80, the max i would pay for this useless garbage is 120-130$ and trust that is also generous Tell me mate is amazon a phone manufacturer now, they should have capitalised on getting as many users as possible to gain familiarity with the masses, selling it at no profit no loss Maybe even subsidized priginal cost Poor amazon leadership reflecting

6. bugsbunny00

Posts: 2267; Member since: Jun 07, 2013

donate to charity already.

7. a1369366

Posts: 27; Member since: Aug 24, 2014

maybe sell it at $350 unlock? @AmazonStupidMarketingTeam

14. Kishin

Posts: 706; Member since: May 30, 2013

Ur right

17. Doakie

Posts: 2478; Member since: May 06, 2009

It wouldn't even be worth $350 off contact. That's in the pricing range of the 64GB OnePlus One and the 32GB Nexus 5...

19. Doakie

Posts: 2478; Member since: May 06, 2009

Err... 16 GB Nexus 5...

8. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

Maybe Jeff Bezos needs to give up his fetish to become Apple. Amazon could be a much greater powerhouse if they sold content for every platform, not just trying to make some content island, ala FakeDroid Kindle Fire. Even Kindle for eBooks is being mismanaged. It cannot even open ePub books. Amazon should be selling multi-platform eBooks but only sells Kindle books. Sooner or later Bezos will realize he is causing a lot of problems. Give it another 3-4 years before some of his moron execs bring it up to him.

10. KillgoreTroutTime

Posts: 433; Member since: Jan 06, 2014

The Paperwhite is one of my favorite all time devices. The Fire phone is a piece of crap.

12. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

The Kindle hardware is great. I upgraded to the Voyage recently and the screen/text quality is amazing. However, the Kindle software has stagnated for years. Amazon should make a big push to get rid of DRM, like Apple did for iTunes music. Instead we have the same old invasive DRM crap and closed formats. It's a broken ecosystem.

9. KillgoreTroutTime

Posts: 433; Member since: Jan 06, 2014

I don't know if people deserve shaming or sympathy for forking over $200 for a contract Fire phone. It just seems so strange that Amazon didn't just make a totally badass phone and then purposely sell it for a loss just to get their foot in the door. If Oneplus can sell the One for $350, why couldn't Amazon have done something similar if not better?

11. Arthurhkt

Posts: 727; Member since: Apr 19, 2012

1st) Only exclusive to AT&T 2nd) Only exclusive to US market 3rd) The pricing was wrong 4th) Spec was inferior compare to other flagship phone

13. 0xFFFF

Posts: 3806; Member since: Apr 16, 2014

The phone existed only as a shopping device and to spy on people. It was a massive piece of fail from the very beginning.

18. fzacek

Posts: 2486; Member since: Jan 26, 2014

I won't buy an Amazon device until they improve the UI and bring back the Google Play Store...

21. 1ceTr0n

Posts: 549; Member since: May 20, 2012

Pic in article = says its all. A firery and sudden death for Fire phone on one network. Amazon, your idiots.

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