Amazon discontinues Fire phone sales, inventory exhausted

Amazon (NASDAQ: AMZN) has discontinued sales of its Fire phone, just over a year after the company released the gadget with much fanfare. An Amazon spokesperson confirmed to GeekWire that the company sold its entire Fire phone inventory at the end of last month.

The timing of GeekWire's report is noteworthy considering today Apple is widely expected to announce new iPhones, likely the iPhone 6S and iPhone 6S Plus. Apple is the No. 1 smartphone vendor in the United States, capturing a 32 percent share of all smartphones shipped in the country in the second quarter. Amazon's Fire phone was an attempt by the Internet retailer to challenge Apple's iPhone with its own expensive, high-end device.

Amazon's Fire phone effort largely dovetailed Apple's initial approach to the smartphone market: Amazon attempted to set its Fire phone apart from the competition with a 3D user interface called Dynamic Perspective and a service called Firefly that let users identify and buy things. The company also released the phone through one carrier -- AT&T -- starting at $199 with a two-year service contract, just as Apple first did with the original iPhone.

However, reviews of the Fire phone were tepid at best, and Amazon said in October 2014 that it would book a write-down charge related to unsold Fire phone inventory and supplier commitment costs of $170 million.

Potentially due to the Fire phone's failure, Amazon appears to have scaled back its hardware ambitions. The company cut dozens of engineers from its consumer hardware unit in recent weeks and has stretched out its timeline for future smartphone development indefinitely, according to a Wall Street Journal report last month. The WSJ report, citing unnamed sources familiar with the matter, indicated that Amazon is pulling back on its hardware innovation and reassessing its priorities, which is causing turmoil at the secretive hardware unit, known as Lab126. It's unclear how many of the 3,000 people who work in Lab126 have been dismissed, the report said.

Also last month, reports emerged that Amazon's CTO of devices, Jon McCormack, left the company to join the Google (NASDAQ: GOOG) unit that works on advanced research projects.

Moreover, according to a Wall Street Journal article this week, Amazon is reportedly preparing to release a $50 tablet with a 6-inch screen in time for the holiday shopping season. The company also plans to release inexpensive 8-inch and 10-inch tablets alongside the $50 device.

Thus, it appears that Amazon has fully withdrawn from the high-end smartphone market altogether and will instead pursue the low-cost tablet space in an effort to further sales of its digital products, including its Prime-branded music, video and file storage services.

Amazon has generally declined to comment on its strategic plans.

For more:
- see this GeekWire article

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