Amazon’s first smartphone hasn’t exactly been a big success story so far. Shortly after launching the Fire Phone, Amazon slashed prices by $200 and the company recently revealed that it had $83 million worth of unsold phones in inventory.

But Amazon’t not ready to give up on the smartphone space just yet. In an interview with Fortune, Amazon VP David Limp says sales have picked up since the price cut… and that Amazon plans to stay in the smartphone business.

amazon fire phone

Amazon has a history of offering high-quality hardware at low prices as a way to give customers a reason to use Amazon’s other services including its digital music, book, movie, and app stores.

You can pick up a Kindle eReader for under $100, but Amazon probably doesn’t make nearly as much money on the hardware as it does on the eBooks you’ll buy to read on that Kindle.

The same goes for its Fire tablets which have starting prices ranging from $99 to $400, but which come tightly bundled with the Amazon’s digital media stores. Customers who spend $99 per year for a Prime membership can also stream millions of songs and thousands of videos.

So when Amazon launched the Fire Phone a lot of people expected it to be dirt cheap as well… instead it was priced like top-tier phones from other smartphone makers. Prices started at $199 with a 2-year AT&T contract or $649 for an unlocked phone.

Amazon figured the phone was worth those prices thanks to unusual features such Dynamic Perspective features which use cameras and motion controls to create 3D effects on the phone’s 2D display.

$83 million in unsold inventory later, it looks like those features weren’t enough to turn heads for a 4.7 inch smartphone with a 720p display and a Qualcomm Snapdragon 800 processor which is only available for use on AT&T’s network.

Amazon’t first Kindle eReader was criticized for ugly design, among other things, but now Amazon dominates the eReader space. I doubt the company will ever be the dominant player in the smartphone space, but Amazon does know a thing or two about revising software and hardware to make its products more appealing.

The company has already rolled out a few software updates for the Fire Phone. Combined with the price cut, they could make the phone more appealing. And if Amazon’s serious about sticking things out, everything Amazon learns from its experience with the Fire Phone could lead to a better (and possibly more successful) Fire Phone 2.

via TechCrunch

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5 replies on “Amazon acknowledged Fire Phone missteps, isn’t giving up yet”

  1. Fire sale for fire phones in black Friday? Xda could make this an awesome device like the touchpad.

  2. Phones are important for Amazon to transition to, as Chinese tablets could become the norm and completely take away amazon’s marketshare. There appears to be more barriers for Chinese phones to enter the US market. I was surprised to see how they tried to differentiate themselves with 3D hype and not aggressive pricing and promotions (like what “mike” is talking about on this thread).
    Personally, this phone flop has really weakened my perception of them… they looked like they were a maker of great consumer devices… I am going to think twice before I buy an Amazon device. I like their USB cables.

  3. Prepay phones are still a huge offering in the US. The way those operators normally make money is to mandate purchase of not only minutes but also curtail those minutes to a set time frame. I for one rarely use a cell phone to make a call but do want one for those times I do. So I do prepay. It costs me about $30/year to keep a phone activated and I never come close to using the minutes. But still – every 4 months (on my plan) I need to buy more minutes regardless.
    Now – if Amazon had just become an MVNO and had no expiration on their pre-pay minutes for Prime members they would have had a home run. I’m already spending $30/year to keep the phone active and never use the minutes I buy. That makes my value proposition to do the same through Prime extremely high.
    I get Prime for $100 and buy some minutes – they last forever as long as I’m on Prime so I don’t have to buy more minutes a few months on. That $30 savings over my current usage makes Prime effectively $70/year to me to use all the other great benefits.

    And it isn’t like they’d lose money because I’m happy to pay outrageous rates like $.10/minute for my minutes because I never use them anyway. I’m lucky if I go through 30 minutes a year on that phone. So they’d do fine on the MVNO side plus get uptake on Prime membership.

    I was shocked when that wasn’t their phone play.

    Instead they make one of the classic blunders along with betting against a Sicilian when death is on the line or getting involved in a land war in Asia – they make a product designed to benefit them and not their customers.

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