Amazon sitting on $83 million of unsold Fire Phones

Amazon sitting on $83 million of unsold Fire Phones

Lee Hutchinson

Ars Technicia

Amazon’s financial results for the third financial quarter of 2014 didn’t do the company any favors when they were announced late last week; the retail giant posted a quarterly net loss of $437 million, up dramatically from last year’s 3Q loss of $41 million. The biggest single contributor to the bad news? Amazon’s Fire Phone.

We had mostly positive things to say about the Fire Phone when we reviewed it a few months back. We were especially impressed with the device’s "Firefly" feature, which quickly and (mostly) accurately recognizes things you point the phone at (and links you to the item's Amazon product page). However, in spite of this and other bits of whiz-bang wizardry, consumer adoption of the Fire Phone has lagged behind Amazon’s production of the device, and the company is now sitting on $83 million worth of unsold Fire Phone inventory.

Further, Amazon’s 3Q results included a $170 million write-down due to "Fire Phone inventory valuation and supplier commitment costs."

Amazon CFO Tom Szkutak explained the losses by noting that the company was still operating in something of an "investment mode," looking past the quarterly bottom line and aiming instead at delivering "returns on invested capital." And he’s not wrong—the company certainly has been buying things this year, most notably Internet video streaming mega-site Twitch.tv, for which Amazon paid $970 million in August.

Things aren’t looking financially rosy for Amazon investors for the next quarter, either. In spite of the holiday buying season’s rapid approach and the huge role Amazon will play in many folks’ gift-giving plans, the company expects an operating loss of between $430 million and $570 million in the final quarter of 2014.