Amazon Reveals Costly Fire Phone Flop In Disappointing Quarter

The results are in for Amazon's hyped Fire Phone and the numbers show it proved costly for the company.

Company CFO Tom Szkutak revealed during Amazon's quarterly earnings call with analysts Thursday that the company is taking a $170 million write-down ’primarily related’ to its unsold smartphones and supplier commitment costs.

The company also revealed it still had $83 million worth of unsold Fire Phone inventory at the close of the quarter.

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The e-commerce giant unveiled its much talked-about first smartphone in late June, and the buzz abounded. It was released to the market in July.

The smartphone was touted for its Dynamic Perspective feature that stirred up rumors of 3-D projection capabilities prior to the launch event, its connection to the Amazon ecosystem with Firefly, creating an always open gateway to purchase items from the company and its access to Amazon Prime. Amazon even offered unlimited cloud storage for media content just for buying the Fire.

The AT&T exclusive device at first retailed for $199 with a contract, but after two short months, the price dropped to $1.

"I never really considered them a player in phones," said Stephen Monteros, vice president of business development and strategic initiatives at SIGMAnet, an Ontario, Calif.-based solution provider and Amazon partner. "I don't see them having a play in the space as they have some pretty big competitors there. I like their web services product, I think it’s a good idea. If their strategy is going to make money in the long term, it's a good play. My initial perception is that it's misguided. If you look at what they are up against, how will Amazon innovate faster than Samsung and Apple? Apple and Samsung innovate very well and are very successful. In web services I feel differently, but in hardware, I don't think they are a player."

AT&T this weekend will sell the Amazon Fire HDX tablet at a $130 discount, bringing the price down to $49, with the purchase of a $0.99 Fire Phone on a two-year contract.

Amazon has also been spending money, completing its purchase of Twitch, a video game tips website, for $970 million during the recently ended quarter

The Fire Phone revelations came after Amazon reported widened losses in the third quarter compared to the year-ago period to $437 million.

Amazon's guidance for the holiday quarter did little to lift Wall Street's spirits with the e-commerce company projecting a $570 million loss.

Shares sunk as much as 13 percent in extended trading Thursday to a recent market value of $144.7 billion.

PUBLISHED OCT. 23, 2014