Chief Financial Officer Tom Szkutak confessed to investors that the company took a $170 million charge related to the write-down of costs associated with its smartphone.
The smartphone was supposed to be one branch of Amazon’s expanding family tree of devices, which has grown from a single e-reader to tablets, a media-streaming box and the smartphone.
The company last week reported a third-quarter loss that significantly widened over a year ago and missed Wall Street expectations, while warning that its fourth-quarter revenue would also disappoint. The Fire Phone charge was a large component of the $437 million lost in the period.
But the Fire Phone, its first foray into the smartphone business, was supposed to do to Amazon what its tablet had done. Make piles of dosh by forcing people to buy its content. The phone itself was not bad either with some technology which should have helped it elbow its way into the market. It could display 3D images and graphics and scan certain products and media for additional information and purchasing options.
Where Amazon went wrong was that it did not subsidise the phone in the same way that it had done for its Fire Tablet. Even with an exclusive partnership with wireless carrier AT&T in the US. The phone has failed to make a dent in the market, and after two months, went from $200 to 99 cents with a two-year contract. In the UK it’s free on various contracts from the O2 network.
The exclusive deal with AT&T in the US did not help either. Most high-profile smartphones opt to go with multiple carriers, but Amazon tied itself to AT&T in exchange for more prominent promotional positioning in the carrier’s shops. However that did not explain why it also tanked in the UK.