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Amazon Firing Spree Follows Fire Phone Flop

By Richard Adhikari
Aug 27, 2015 2:32 PM PT

Amazon has given the boot to dozens of engineers who worked on its ill-fated Fire Phone, The Wall Street Journal reported Wednesday.

The purged staffers reportedly worked at Lab126, Amazon's secretive Silicon Valley-based hardware development center.

Amazon also scaled back or killed off several other Lab126 projects, including a large-screen tablet, according to the report, and it reorganized the center to combine two hardware units into one.

"That's standard operating procedure," said Mike Jude, a research manager at Frost & Sullivan.

"There are many examples where, when a particular product doesn't work in the marketplace, the group working on it is downsized, spun off or eliminated," he told the E-Commerce Times. "Sun Microsystems used to do this all the time."

What PR Fallout?

The WSJ report comes two weeks after a New York Times exposť on apparently terrible working conditions at Amazon, giving rise to the question of how the firings might impact public perception of the company.

It "adds slightly to the belief that it sucks to work at Amazon, but I doubt it will have any lasting impact," said Rob Enderle, principal analyst at the Enderle Group.

"When you offer products at a competitive price, people really don't care what the working conditions at your company are," Frost's Jude suggested. "In the abstract, they might -- but day to day, probably not."

Investors apparently like the move -- Amazon's stock rose by 3.51 percent on Thursday, closing the day at US$518.37.

What Happens at Lab126

The wanderings of top Lab126 engineer Jon McCormack may have been an indication that all was not well at the facility.

McCormack -- Lab126's CTO in charge of devices including the Kindle and Fire TV -- earlier this month left to work for Google. That was his second departure. He left Lab126 for Yahoo late last year but returned to Amazon after just two months.

Lab126 management reportedly shifts priorities frequently, making for ill-defined roles and leading some staff to leave.

The lab released 10 devices last year, including a TV set-top box, the Echo digital assistant speaker, and a wand for scanning bar codes at home.

Amazon reportedly has stopped or scaled back other development projects, including a smart stylus, a projector and a 14-inch tablet.

However, it's apparently continuing with a high-end computer for the kitchen, code-named "Kabinet."

Kabinet "would be an Echo device with a screen," said Eric Smith, a senior analyst at Strategy Analytics.

"Amazon clearly has designs on the smart home market," he told the E-Commerce Times. "If they can expand the functionality of Echo in Kabinet to control smart home devices and other aspects of life online, there's opportunity to redefine how people interact with computing devices."

The Fire Phone Fizzle

Amazon CEO Jeff Bezos has taken fire for the Fire Phone's problems. He apparently insisted it have a 3D screen and other features, such as facial recognition, that critics considered gimmicky and unnecessarily expensive.

Shortly after the Fire Phone's unveiling last spring, skeptics began questioning its viability.

Within two months, Amazon had cut the two-year-contract price of the phone from $199 to 99 cents. The phone is currently unavailable from Amazon at any price, but N1 Wireless is selling it unlocked for $139.99. It comes with a year of Amazon Prime tossed in -- that's a $100 value.

The Fire Phone failed because the market didn't need a device designed to help Amazon sell products, suggested Jude.

"The biggest competition for the Fire Phone was the Kindle Fire One, so Amazon was competing against itself," he pointed out.

The Fire Phone failed due to three main factors -- terrible design, bad distribution and weak marketing, said Strategy Analytics analyst Neil Mawston.

It's not clear whether smartphone work will continue. Amazon apparently told some smartphone engineers earlier this year that it would shelve further development of the devices.

"If Amazon does a phone again, it will be in close partnership with someone who knows the phone market," Enderle told the E-Commerce Times, as "it doesn't seem to have the stomach for failure."

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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