Amazon

So What If Its First Phone Flopped? Amazon Is Keeping the Fire Alive Anyway.

Former West Coast Editor

October 31, 2014 3 min read

Amazon played with Fire and it got burned. Really burned. But not enough to tap out of the sizzling smartphone market.

The Seattle-based ecommerce heavyweight had high (and hyper-hyped) hopes for its first branded handset. But the Fire phone didn’t catch fire with consumers. Quite the opposite: It landed with a thud and ended up a two-star dud on its own website. Yikes.

Only four months post-launch and shortly after deeply slashing prices, Amazon is now stuck with stacks and stacks of the smartphone that nobody wanted -- $83 million worth, to be exact. If that’s not ugly enough, Amazon CTO Tom Szkutak also admitted last week that the company had to swallow a painful $170 million write-down pill last quarter, “primarily related to Fire Phone inventory valuation and supplier commitment costs.” Just what a perpetually profit-allergic business needs. (The company reported a Q3 operating loss of $544 million.)

Still, some fires aren’t so easily put out, catastrophic flops included. Not at Amazon. Yesterday David Limp, the tech giant’s senior vice president of devices, told Fortune that Amazon isn’t giving up on the Fire phone any time soon. It will hang tough and stay the course, just as it did with its inaugural and initially poorly received Kindle e-reader in 2007.

“We are going to keep iterating software features to get it [the Fire phone] better and better,” Limp said. “Each release that we’re doing, we’re learning. Beyond that, I leave it out there to see what people think.”

Limp blamed the Fire phone’s price tag for its lukewarm reception. “We didn’t get the price right,” he told Fortune. “I think people come to expect a great value, and we sort of mismatched expectations. We thought we had it right. But we’re also willing to say, ‘we missed.’ And so we corrected.”

After just two months on the market, Amazon dropped the price of the $199 32-gigabyte model to 99 cents, with a two-year contract. The 64-gigabyte version, originally priced at $299 is now $99.

Limp didn’t spill any juicy details about future Fire phones, but said Amazon will continue to spiff up the existing model with software updates. Will a few software patches be enough to rekindle a love affair with consumers that never existed in the first place? We doubt it.