Amazon exec blames lackluster Fire Phone sales on pricing, says project will continue

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An Amazon executive on Thursday said the Fire Phone's failure was a pricing issue and that the company plans to move forward with next-generation products, even after eating a $170 million charge largely associated with the device's poor market performance and supplier costs.

In an interview with Fortune, Amazon SVP of Devices David Limp said initial Fire smartphone demand was lower than expected — the company has $83 million worth of unsold supply — due to an overzealous pricing model. The e-commerce giant usually positions first-party products like the Kindle Fire tablet series at price tiers below the competition, making up for hardware costs with content sales.

"We didn't get the price right," Limp said. "I think people come to expect a great value, and we sort of mismatched expectations. We thought we had it right. But we're also willing to say, 'we missed.' And so we corrected."

Amazon did indeed make a correction in September, amounting to a massive cut in subsidized carrier pricing for the 32GB model, from $199 to only 99 cents. The move came one day prior to Apple's iPhone 6 and 6 Plus unveiling.

"When you're taking risks, they're not all going to pay off. Those are the facts," he said.

Despite the early setbacks, Amazon is looking to push forward with its smartphone initiative. Limp said Amazon will keep iterating on software, learning as it goes. He also noted other Amazon releases like the Fire TV and Kindle Fire tablets are "very successful," but as usual would not reveal actual sales numbers.

Fire Phone was first announced in June after rumors suggested the retailer was working on an entry into the smartphone business. Settings itself apart from competing devices, Fire Phone sports a unique three-dimensional user interface that dynamically adjusts based on multiple head-tracking front-facing cameras.

As with other Fire products, the Fire Phone boasts features intrinsically tied with Amazon's online sales services, in this case "Firefly," a system capable of recognizing physical media, songs, TV shows, QR codes and more.