Amazon loses $170 million on Fire phone
Amazon’s Fire phone is a flop, its latest results suggest.
The company posted a record $437 million (£270 million) net loss for Q3 2014, more than ten times its loss in Q3 2013. $170 million (£105 million) of this latest loss was attributed by CFO Tom Szkutak to “Fire phone inventory evaluation and supplier commitment cost”.
In September, Amazon knocked $200 off the price of the Fire in the US, meaning it was almost being sold at cost, to try and boost sales.
Additionally, the company’s back-to-school textbook sales, which have traditionally generated significant amounts of money, are shrinking in North America in particular, as people choose to rent rather than purchase them.
The company has also warned it may post a loss of up to $570 million for the current quarter, traditionally its biggest shopping season.
Amazon has consistently made both quarterly and annual losses due to CEO Jeff Bezos strategy of reinvesting profits back into the company to grow its market share.
Previously, strong growth seemed to satisfy investors and persuade them to overlook these loss-making practices, but it seems they are starting to lose faith in this approach.
Until recently, when Amazon posted a loss, shares had slumped by less than 5%, however, when the company posted what was, until now, a record quarterly loss last quarter, shares fell by 11%.
Following the announcement of the most recent quarter’s loss, shares fell 13%, wiping more than $15 billion off of Amazon’s market value.
Rob Plaza, senior analyst at Key Private Bank, told Reuters: “[Increasing losses take] the topline growth story off the table. And now they’ve got to deliver on profit margins.”