Thursday, October 30, 2014

Amazon Still Pursuing Hardware At Their Own Peril

Last Friday, I wrote about Amazon's identity problem with their hands in too many places and their financial results deemed disappointing.  They have clearly embarked on a strategy of forsaking short term results for long term opportunities.  And they continue to invest across the board, sometimes at the risk of losing money. 

Hardware products continue to attract the attention of CEO Jeff Bezos.  According to the NY Times, "Amazon now looks to be preparing a full-scale ground invasion of the rest of the gadget landscape. In addition to a new Kindle reader, this year the company entered two new device categories, and it expanded the rest of its hardware lineup."   Their latest release is the Fire TV Stick, a Chromecast-like device to distribute OTT content on your TV.  At the same time, they are updating their Kindle e-reader and tablets.  Unfortunately, their attempt to get market share in the competitive mobile phone arena has failed.  Again from the NY Times, "Amazon disclosed last week that it was sitting on $83 million in unsold Fire Phones, and would be taking a $170 million write-down on that program."  With Apple and Samsung releasing larger mobile phones, many see cannibalization of  the tablet market. In fact, while Apple iPad sales slow, their iMac sales have grown. 

Is hardware the right business for Amazon; The e-reader market helped them to drive e-book sales.  But in the world of tablets, smartphones, and OTT, Amazon may not be so lucky.  Their strength as an e-commerce retailer might be better suited working with the Apple's Samsung, and Google, not competing against them.