Amazon says it's sticking with smartphones despite the Fire phone's fizzle

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Credit: Image: Susie Ochs

Amazon says it's not giving up on the Fire phone, despite disastrous sales and a cold critical reception so far.

Speaking to Fortune, Amazon Senior Vice President of Devices David Limp acknowledged that the company has made mistakes with its first smartphone. “We didn’t get the price right,” Limp said, referring to the Fire phone's initial $199 on-contract price tag. “I think people come to expect a great value, and we sort of mismatched expectations”

Amazon has since slashed the price to $1 with a two-year contract, and AT&T is even bundling Amazon's Kindle Fire HDX tablet for just $49. While Limp said the price cuts have boosted sales, last week Amazon took at $170 million writedown as a result. Amazon is still sitting on $83 million worth of unsold inventory, Limp said.

Still, Amazon is undeterred. Limp said the company will continue supporting the phone through software updates--it has released two major ones already--and pointed out that the Kindle e-reader took several iterations before it became a hit. “We are going to keep iterating software features to get it better and better,” Limp said.

Why this matters: Limp may have a point about the Kindle, but the difference in that case was that Amazon was effectively creating the e-reader market. With the Fire phone, Amazon is entering a crowded field in which iOS and Android have major advantages in features and apps. While the small number of Fire phone owners should be relieved to hear of Amazon's commitment, everyone else will simply need better reasons to consider the phone in the first place.

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