Amazon taking hefty losses over flagging Fire Phone sales

[First published on IT Pro Portal]

International commerce corporation Amazon has announced that it will be taking a $170 million (£105 million) charge “primarily related to Fire Phone inventory valuation and supplier commitment costs”. Essentially the company has revealed that their new Fire smartphone hasn’t lived up to the hype.

The Fire arrived on the market at around £3385 per model, but in America a similar price was slashed to just 99 cents if the phone was bought with a two-year subscription.

According to Re/code, Amazon CFO Tom Szkutak labelled the new phone “a good device in a very competitive market” – outlining his belief that the device needs time to settle into the consumer mindset.

It may be a case of wait and see for Amazon, which packed the Fire Phone with a number of extra features and add-ons. Everyone who snaps one up gets free year-long subscription to Amazon Prime, the premium two-day delivery service popular on Amazon’s website.

Getting users onto a Prime program may well be key to Amazon’s profits, as studies have found that those on the Prime program spend around twice as much as those without it.

Whether Amazon pushes ahead in developing a new Fire Phone is yet to be seen. It’s possible that the company might want to pick a more aggressive price strategy, as the iPhone 5S and Galaxy S5 were its main competitors in the market for price.

Jeff Bezos told Re/code that Amazon’s job is “to build the greatest device we know how to build”, maybe they should try again?

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