Poor Phone Sales Hurt Amazon's Bottom Line

Amazon has confirmed in a conference call that it will take a $170m writedown following lower-than-expected sales of its Fire Phone.

Responding to a disappointing third-quarter financial report, the web giant said it would take the charge "primarily related to Fire Phone inventory valuation and supplier commitment costs."

The handset was originally launched with a $199 price-tag in the US, but this was quickly reduced to 99 cents with a two-year subscription with AT&T, the exclusive carrier of the phone.

The device was released with much fanfare regarding its image recognition technology, Firefly, but the handset has generally receive a mixed response from customer. Reviewers on Amazon have given the phone an average rating of 2.1 stars out of five, making it the worst ranked device among the site's Top 10 list of best-selling contract phones.

A separate conference call also suggested that even Amazon'e enthusiasm for the device is waning. Chief financial officer, Tom Szkutak described the Fire Phone as "a good device in a very competitive market," which doesn't quite match the resounding level of support that CEO Jeff Bezos gave the phone, when he told Recode, "Our job is to build the greatest device we know how to build."

Bezos is unlikely to be too concerned by the setback however, with the CEO well-known for taking a long term view on new businesses. Despite its low sales, the handset has contributed towards the growth of the firm's Prime programme, by granting owners a free one-year subscription to the service. The platform is becoming increasingly important to the company, after research found that Prime customers spend approximately twice as much as non-Prime members each year.

Rivals Jibe: 'Oops'

However, that hasn't stopped rival technology firms making a few jibes in response to Amazon's disappointing figures.

Upon hearing of the writedown, John Legere, CEO of AT&T competitor T-Mobile, simply tweeted "oops."

Author: Barclay Ballard