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The Fire Phone Debacle and What It Means For Amazon's Future
HughPickens.com points out an article at Fast Company that dug into the creation of Amazon's floundering Fire Phone to figure out why the company pushed so hard to bring it to market. The piece is an indictment of Jeff Bezos's determination to make the Fire Phone into a competitor for an already-saturated high-end smartphone market. "This wasn't some vague guideline from an executive busy running other parts of the business; based on interviews with more than three dozen current and former employees, most of whom were deeply involved with the project, the CEO drove every aspect of the phone’s creation from the outset."
Now that Amazon's growth is slowing and profits have yet to be seen, investors and analysts have run out of patience for gambles like this one. "What makes the Fire Phone a particularly troubling adventure, however, is that Amazon’s CEO seemingly lost track of the essential driver of his company’s brand. It’s understandable that Bezos would want to give Amazon a premium shine, but to focus on a high-end product, instead of the kind of service that has always distinguished the company, proved misguided."
Now that Amazon's growth is slowing and profits have yet to be seen, investors and analysts have run out of patience for gambles like this one. "What makes the Fire Phone a particularly troubling adventure, however, is that Amazon’s CEO seemingly lost track of the essential driver of his company’s brand. It’s understandable that Bezos would want to give Amazon a premium shine, but to focus on a high-end product, instead of the kind of service that has always distinguished the company, proved misguided."
> "but to focus on a high-end product, instead of the kind of service that has always distinguished the company, proved misguided."
What service suffered as a result of this? The product ended up not being what was desired by the public, but what specifically would have fixed this? Just saying "with 20-20 hindsight, that wasn't a good use of your time" is meaningless. When you have built a multi-billion dollar business, you can claim that you have better judgement, until then you are just making noise
David Lang
Growth is good and all, and short termism is bad, butyou can't "make a loss on every sale but make up for it in volume" forever.
The window is closing. Amazon is huge, but so big now they face similar logistics problems to bricks and mortar stores. In addition all the nice little tax loopholes they used to profit from are rapidly closing so they from a tax perspective have to compete on an even footing with those bricks and mortar stores.
So, what's the future? They were massively dominant, but recently I've noticed they are not reliably the cheapest source for stuff any more. There are often better deals to be had elsewhere.
I don't see them vanishing any time soon, but think the glory days are ending.
SJW n. One who posts facts.
Gotta love investors that shiver at a slowdown of the second derivative of the growth curve. Amazon is still growing and the growth is increasing, just not a fast enough increase of growth growing.
Amazon is a huge successful brand with multiple obvious methods of income from product retail to cloud services.
This seems like a bunch of investors not liking how Bezos is spending their money.
All of their hardware sucks. Largely because the software in their hardware sucks. They're using Android, fine, but it's a locked-down version of Android customized to exclusively use their own store (I believe you can get Google Play back, but it takes work). Which is them giving both the user and Google a big "fuck you."
And then they're trying to break into a saturated market with big name competitors. What's the killer feature? Where's the value added? What aspect sufficiently differentiates them from their competitors? The Amazon name isn't known for phones and won't carry the product. Their shaft of the customers by tying the phone to their own app store doesn't help. Their help system? Few enough people want to admit they need help, much less have the foresight to improve the experience. And Android is so easy to use, who really needs that much help anyway, especially help they can't get from say, their kids or their friends?
The rest of Amazon's hardware sucks too. They're copies of other products that might visually be nice, but lack usability sense. Google's USB fob can go anywhere. Amazon can only go where Amazon wants you to go. How can that even compete?
And then there's the other stuff that's not even worth mentioning. Like the speaker. What is that even for? Listening to music from Amazon only? Where's the direction? Where's the strategy? It's like they're throwing shit at the wall to see what sticks. Except said wall is the glass back of an elaborate toilet that also is a waterfall.
Actually, I know what it is. They had so much success with the Kindle, they had no idea what made the Kindle successful: they already had the dominant online book store and they were the first to market. Of course it would be successful. But they don't dominate anything else, and they're late to the game everywhere. How can they expect the same success?
"If a nation expects to be ignorant and free in a state of civilization, it expects what never was and never will be."
They risked a gamble, so what. Companies build products that fails - it's not even a headline. Amazon built something that people think is a failure, then everyone went to bed, woke up the next day and everyone moved on.
My ism, it's full of beliefs.
I was an an engineer in that team during the first incarnation of the project. The article is very very inaccurate.
- team was not scrapped by jeff, at least not until large number of people walked out due to mismanagement
- prototypes that worked (and were of phone size & shape) existed more than 2 years before launch but then (as mentioned) team walked and it all had to be scrapped
- hw team often undercut sw team by replacing components and not telling anyone about it
- hw team often made mistakes of the very basic variety (two separate sets of pull-ups on a single i2c bus)
- some parts choices were motivated by personal interests of people in the hw team, even against their own data & analyses. This was allowed to proceed
- some of the management made the team look very foolish in front of vendors (asking questions that made no sense in the current millennium)
- sw team was kept busy by endless meetings with no end in sight, which significantly cut into any chance of productivity
Well its the velocity that's slowing so not second order derivative, its the first derivative, Amazon is still growing but the rate of growth is slowing, Google [Forbes Amazon Growth].
It makes no profit and already has successful and yet unprofitable cloud services. Cloud services won't fix the loss making business. The Fire phone doesn't work, and the Fire TV device doesn't sell enough to turn the company profitable.
Investors want returns, not brand. But when he starts making returns, then he gets a PE and then they'll realize that he has a very low/sometimes negative margin discounter business which won't generate large profits.
At this point in Amazon's key markets such as the US there is no Pepsi to Amazon's coke. This is actually a dangerous thing for a large company for they could start attributing their wild success to all kinds of the wrong things including simply a divine blessing. The risk for Amazon is that if this situation continues for too long that the competitor won't simply be competitive but will actually leverage any weaknesses that Amazon develops.
For instance I heard a rumour that Microsoft wanted to really take on Word Perfect. So they looked at WP's finances and realized that WP was not a lean company at all. Yet profit margins were really slim. So Microsoft didn't need to really go head to head with WP in all markets in a giant slug fest but that they only needed to reduce WP's revenue by 5% which would mean they would start taking losses. So MS found the easiest 5% to go for and took it with ease. Then with WP on the ropes MS was able to clean up the other 95%.
I also read that in the early days of MS getting into the C++ IDE world that they couldn't make any headway against Borland C++. So a new guy running the C++ project asked the marketing people what C++ programmers wanted; which turned out to be templates. But those were the elite of C++ programmers. So he re-asked the question to the typical C++ programmer and they said that they wanted to find an easy way to make Windows programs (windows was new and much programming was still in DOS at the time). So he released VisualStudio 1.0 which had easy wizards to get a windows program up and running and it was years before VS eventually got around to noodling with templates. But I remember the last version of Borland C++ that I used was all blah blah blah about their wonderful implementation of templates.
So I see Amazon as Borland C++ or Word Perfect 4.2. They are kings of their universe and there is no real competitor on the horizon. And then boom headshot and they were gone. I am certain that if you went to a tech conference 6 months before each of these two products died and suggested that in 2 years the products wouldn't basically be in use that people would have laughed you out of the room.
So at this point Amazon looks eternal and each of their many many mistakes seem to be tolerable. But I will give an example of a WP mistake. They were slightly worried about MS Windows and this crappy little word product. So they thought by dragging their feet with on Windows version that they stood a chance of actually killing windows entirely and keeping the world on DOS. I suspect that many seemingly smart executives nodded approvingly at this brilliant plan.
The Amazon phone takes something cool (Android) and locks it down Apple style. Apple can get away with it because they have perceived value in better quality hardware/design/vertical integration/app selection, etc. Amazon doesn't offer any of those benefits. So it ends up coming off as a cheap, locked down Android phone with crummy hardware and many of the good parts of Android missing. There are other cheap Android phones you can buy that offer more than the Amazon phone.
What Amazon needs to do is offer something the other guys can't offer. Give customers free shipping on anything they buy from Amazon using their phone. Or maybe a half price Amazon Prime deal for the duration of the 2 year contract. Make it possible to add Google Services without having to root the phone. Stuff like that.
Simply putting out yet another cheap Android phone is simply a race to the bottom. But a mostly stock Amazon branded Android phone with some cool Amazon services bundled in with it - now you're cooking with gas.
Shares outstanding 2/18/2004: 404,330,593
Shares outstanding 1/22/2009: 428,583,135
Shares outstanding 1/17/2014: 459,264,535
Shares outstanding 10/17/2014: 463,006,452
The increases have virtually entirely been based on stock-based compensation to employees or stock issued as a method of acquiring other businesses. There have been no "stock sales to pay off existing shareholders".
Retained earnings at 9/30/2014: $1,735,000,000, i.e. inception to date they have accumulated more net income than net losses (albeit fairly thin compared to the sheer volume of revenue). They have indeed "turned a profit".
Meanwhile, they are fairly liquid depending on the time of year you look at them (they tend to be flush with cash right after Christmas, imagine that) and had added almost $5 billion in infrastructure between 12/2013 and 9/2014 alone, mostly with cash.
It's fine to hate on teh evil corporations but you should at least accuse them of things they actually do instead of things they don't (no pyramid schemes).