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  • Ahead of the iPhone 6 Launch: The Amazon Fire Sale

    September 9th, 2014

    The critics suggested that Amazon had it all wrong pricing the Fire Phone at $199 with atwo-year contract, not to mention having it available at just one carrier — AT&T. In the past, Amazon, famous for generating cash flow but little or no profit, has sold hardware at roughly cost. The hope was to generate enough sales from Amazon’s storefront to make it all worthwhile.

    While $199 is not a bad subsidized price for a high-end smartphone, that space is essentially dominated by the iPhone and various Samsung handsets. Worse, reviewers weren’t wowed by Amazon’s first foray into the mobile handset market. I won’t bother mentioning the silly fluff that passed for features. At the end of the day, customers weren’t interested in buying a smartphone that was essentially designed as an entry point to Amazon’s storefront.

    This is why, after just a few weeks on sale, the price has been cut to 99 cents with a two-year contract. That’s a big comedown, and clearly AT&T has lots of unsold inventory to move. Indeed, it has been reported that a mere 35,000 units were sold in the first 20 days. Now that makes pathetic sound pathetic.

    If it was Amazon’s hope to somehow stifle the impact of the iPhone 6, cutting the price isn’t an alternative; there’s little chance customers will suddenly flock to buy something they have already rejected or ignored. What’s more, there will be a free iPhone — or nearly free — with a two-year contract after the Apple announcements. It will likely be a far better, more usable product than a Fire Phone.

    Of course, Amazon isn’t the only company to attempt to blunt the impact of Apple’s expected announcements. Last week, both Samsung and Motorola Mobility released new gear. Both garnered a small amount of publicity that faded into the fog as the run-up to Apple’s media event became more intense. By the weekend, it was a case of Sam-who? or Moto-who? as far as getting control of the message was concerned.

    With Tim Cook’s interview promising that Apple would do better to help customers make their iCloud accounts more secure, that particular problem also appeared to fade. While it’s certainly important if people — prominent or otherwise — have their accounts hacked, that’s been going on for quite a while. Don’t forget how many millions of credit card numbers were stolen from Target last year, or the more recent thefts of data from Home Depot and other vendors.

    But when Apple is mentioned, particularly in connection with celebrities, it becomes a major issue that must indicate the company is in a bad way. I know online accounts are sometimes hacked, but I’m just as worried about data thefts from such retailers as Target. You see, I made a purchase with a bank debit card at a nearly Target store during the period where the episode happened. I quickly had the card replaced by the bank just to be sure, although I didn’t see any evidence of bogus transactions.

    In any case, the Amazon/AT&T fire sale is nothing new. A few years ago, HP launched a tablet featuring Palm’s WebOS with huge fanfare. The TouchPad got plenty of publicity, sold at a starting price of $499 for the 16GB version, same as the iPad. But sales tanked. Few were interested, at least until a $99 blowout sale was announced a few weeks later to dump unsold inventory.

    That misbegotten enterprise quickly ended HP’s foray into the tablet space to compete with the iPad, at least for a while, and they also ditched WebOS, which these days powers LG TV sets. It was an ignominious defeat to be sure. More recently, HP managed to sell more PCs than expected last quarter, but remains in search of a vision under the leadership of Meg Whitman, once the CEO of eBay, and a failed political candidate.

    Looking at the ashes of the Amazon Fire Phone affair, the price cut doesn’t necessarily mean the product is history. If there’s enough business, perhaps Amazon will push the handset to other carriers, still at a lower price, in hopes that the same approach used to sell Kindles will work with smartphones. Maybe it will, though I doubt it. A Kindle makes sense, particularly as devices to read digital books or watch videos. They are surely cheap enough, and Amazon’s e-book library is rich with choices to fill your leisure hours with enjoyment. Amazon Instant Video is growing with more and more exclusive content.

    A smartphone sold with the same goal, to entice you to buy stuff from Amazon, is a less compelling alternative. The display is too small to show off Amazon’s products to their best advantage, so it may be that the Fire Phone won’t have the longevity of the Kindle. Or maybe Amazon will go back to the drawing board and consider other smartphone options for the future, maybe with features that actually make sense.

    Meantime, while I was writing this piece, I got an email from Amazon touting the 99 cent deal for the Fire Phone. Yes, it also includes a one-year Amazon Prime membership, which normally goes for $99 after a recent price increase. That actually might be a decent deal for some, particularly if you buy lots of stuff from Amazon and would like to take advantage of getting free two-day shipping for most products, plus free Amazon Instant Video.

    For the rest of you, this is all about yet another failed iPhone killer.



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