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 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.