Amazon takes $170M writedown on Fire phone

Amazon (NASDAQ: AMZN) revealed how much it is losing on its Fire smartphone: at least $170 million to date.

Amazon CFO Tom Szkutak disclosed during the company' third-quarter earnings conference call with analysts that Amazon would book a write-down charge related to unsold Fire phone inventory and supplier commitment costs of $170 million. Szkutak said the vast majority of that charge was related to North America, but there was around $25 million in international costs as well. Interestingly, Szkutak noted that at the end of the third quarter, the company had around $83 million worth of Fire phone inventory on hand.

On a separate conference call with reporters, according to Re/code, Szkutak called the Fire phone "a good device in a very competitive market," which is not exactly a ringing endorsement. Amazon CEO Jeff Bezos had told Re/code in June that the company's job was "to build the greatest device we know how to build."

Overall in the third quarter, Amazon reported a net loss of $437 million, which was way above the $41 million loss the company posted in the year-ago period. Analysts had expected loss of $331.4 million, according to Bloomberg. Total sales jumped 20 percent to $20.6 billion, lower than sales of $20.9 billion analysts had expected.

The Fire phone went on sale July 25, exclusively through AT&T Mobility (NYSE: T) for $199 with a two-year contract or for 24 monthly payments of $27.09 through AT&T's Next handset upgrade program. However, in early September, just weeks after releasing the phone, Amazon dropped the price of the Fire phone to 99 cents with a two-year contract with AT&T. Such price drops often indicate sluggish demand for a product.

Reviewers of the phone generally found its main features interesting but gimmicky and gave the device overall mixed reviews. 

The Fire phone comes with a free, one-year subscription to Amazon Prime, the company's popular two-day shipping program, which also gives users access to a digital content library. Having jumped into the phone market, Amazon is not likely to abandon it in the near term, but the evidence so far suggested its first attempt has not worked.

For more:
- see this release
- see this Bloomberg article
- see this NYT article
- see this Seeking Alpha transcript
- see this Re/code article
- see this CNET article

Special Report: Wireless in the third quarter of 2014

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