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Don’t count Amazon out of the handset business quite yet

Amazon’s $437 million dollar loss in the latest quarter is due in large part to its hapless efforts to sell its own smartphone. The company said it will take a $170 million writedown “primarily related to Fire phone inventory valuation and supplier commitment costs,” as Jason Del Rey of Re/code reported, and TechnoBuffalo writes that Amazon is sitting on $83 million worth of unsold devices it can’t unload.

Amazon introduced its long-awaited smartphone in June to considerable hype, but in early September it slashed the price from $200 to $.99 (with a two-year contract) to shore up disappointing sales. But the huge discount wasn’t enough to offset some big missteps by Amazon that I documented in my second-quarter wrap-up a few months ago: Not only was the gadget over-priced, forcing it to compete with the iPhone and other top-end smartphones, it was (and remains) available only on AT&T’s network. And because it runs Amazon’s forked version of Android, it can’t include key apps like Google’s flagship app store or Google Maps — a shortcoming that hasn’t been a problem for Amazon’s line of tablets but may have severely limited the appeal of the Fire phone.

Retail payments via mobile handsets will grow dramatically over the next several years, however, as Juniper Research predicted earlier this year, and Amazon CEO Jeff Bezos has a track record of experimenting in new products and services and taking a long-term view of new markets. The Fire phone debacle may prompt Amazon to drop its hardware experiment and focus more intently on developing hardware to boost sales via smartphones, but don’t be surprised if we see a second Amazon-branded handset come to market in the next year or two. And if Amazon learns from its mistakes with the Fire phone, it could still be a force in the smartphone business.