Fortune

Amazon exec tells Fortune how it bumbled the launch of its first smartphone

When it introduced the Fire smartphone in July, Amazon bet sales would be something worth bragging about. But three months in, it’s obvious the Fire phone is more dud than runaway success.

Last week, Amazon CTO Tom Szkutak disclosed as much by saying the company took a $170 million charge, mostly associated with the Fire phone and related supplier costs. He also acknowledged that the company had a huge surplus of $83 million unsold phones collecting dust somewhere.

In an interview with Fortune, Amazon Senior Vice President of Devices David Limp acknowledged Amazon bumbled the phone’s pricing. Traditionally, Amazon undercuts the competition on hardware, pairing lower prices and solid features. But with the Fire phone, Amazon stuck to standard industry pricing, asking $199 for the 32 gigabyte model and $299 for the 64 gigabyte. On that front, Amazon, well, misfired.

“We didn’t get the price right,” Limp admitted. “I think people come to expect a great value, and we sort of mismatched expectations. We thought we had it right. But we’re also willing to say, ‘we missed.’ And so we corrected.”

In September, the company slashed the Fire phone’s price from $199 to 99 cents, a steep discount Limp said yielded significantly better sales. He also pointed out that two software updates since the Fire Phone’s launch ironed out some problems customers were having with the device.

Still, $83 million of unsold phones is a lot, even for a tech giant like Amazon. And a visit to the Fire phone’s page on Amazon.com reveals a 2-star customer rating; reviews call out issues like the Fire phone running hot and a small selection of apps.

Some analysts like Mark Mahaney, Managing Director at RBC Capital Markets, contend it’s “too late” for Amazon to salvage the Fire phone, but Limp claims Amazon isn’t yanking support any time soon.

“When you’re taking risks, they’re not all going to pay off,” said Limp. “Those are the facts.” Limp pointed out other Amazon devices, like its Fire tablet line and Fire TV streaming box, that he described as being “very successful” with customers, but he declined to discuss sales numbers.

With the Fire phone, Amazon plans to stay the course, as it has with its Kindle readers. As CEO Jeff Bezos likes to point out, critics panned the first Kindle e-reader in 2007, but it evolved into a widely-used family of products. Likewise, Amazon seems intent on taking the same long-term approach with the Fire phone, despite a competitive smartphone market.

“We are going to keep iterating software features to get it better and better,” said Limp. “Each release that we’re doing, we’re learning. Beyond that, I leave it out there to see what people think.”

This article originally appeared on Fortune.com

Former tech exec diving headlong into the competitive smartphone market with a new affordable, high-design brand

John Sculley, former CEO of Apple, debuted his new low-cost smartphone brand Obi Mobiles in Singapore Thursday as part of the company’s global rollout.

The company will offer devices priced between $70 and $200 and is looking to go head-to-head with other youth-focused, budget-conscience Chinese phone manufacturers like Xiaomi and Lenovo by keying in to the cache of Apple: distinctive design and branding.

“We are very focused on the younger (13 to 24 year old) consumers,” Sculley told CNBC. “Many may aspire to an iPhone because it’s a beautiful product, but they may not have hundreds of dollars.”

Obi Mobiles also faces competition from Android devices, which are made in China, and plans to stand out from the glut of smartphone brands currently on the market by producing phones with visual appeal and an extensive global distribution network.

Sculley was able to lure several Apple alumni to his new venture in order to create and market a distinctive phone that will lure new users. The list includes Robert Brunner, Apple’s former director of industrial design and chief designer of Beats Electronics.

Obi phones are already for sale in India and the Middle East, and they will begin selling online in Singapore on Nov. 11 through e-commerce site Lazada. By mid-2015, Scully plans to extend availability to the rest of Southeast Asia, Eastern Europe, Africa and Latin America.

This article originally appeared on Fortune.com

Even as the global economy faces headwinds

The U.S. posted a better-than-expected jump in growth for the third quarter, the latest indication that the world’s largest economy is performing well even as the global economy faces headwinds.

Real gross domestic product, or the output of goods and services produced by U.S. labor and property, jumped at a seasonally adjusted annual rate of 3.5% in the third quarter. The Commerce Department reported the increase was primarily due to consumer spending, exports, and higher government spending on the federal, state and local levels.

Economists polled by Bloomberg had projected a 3% increase in GDP, which comes after a 4.6% increase in the second quarter that was aided by a rebound in activity after a harsh winter.

“Finally the consensus is coming around that the U.S. has some above-trend growth,” said Bob Baur, chief global economist at Principal Global Investors. Baur estimates that the U.S. economy can reported growth of 3% or more over the next few quarters, driven by stronger consumer spending thanks to low interest rates, falling gas prices and an improving labor market.

The U.S. economy has performed well of late, consistently adding jobs and reporting sturdy sales of both homes and new automobiles. Meanwhile, many are optimistic that lower gas prices at the pump can lead to higher spending from consumers. Consumer confidence readings are at their highest level in seven years, something that will be music to the retail sector’s ears as the nation prepares for the holiday season.

The strong growth picture in the U.S. contrasts with some red flags that have been raised about the global economy. The International Monetary Fund earlier this month cut its outlook for global growth in 2015, citing a deterioration in expectations for the euro area, Brazil, Russia and Jaan. But the IMF raised its growth targets for the U.S. for this year and in 2015.

“Things are pretty good, we might not grow 4% in the fourth quarter and next year, but 3% [growth] is doable, despite global growth fears,” said John Canally, chief economist strategist for LPL Financial.

The Federal Reserve, which this month ended its most recent stimulus program, still struck a somewhat cautious tone about the U.S. economy. The Fed touted solid job gains and a lower unemployment rate, as well as rising household spending and more investment from businesses. But the Fed worries that the housing sector’s recovery remains slow, and inflation continues to run below the Federal Open Market Committee’s longer-term objective.

This article originally appeared on Fortune.com

NatureBox is thinking about delivery methods for its healthy snacks beyond the usual subscription service

NatureBox is refusing to be boxed in as just another e-commerce company.

This Saturday, the subscription snack box provider will begin to stock snacks that will be offered to passengers on American Airlines international flights to and from Latin America and Europe. The company’s snacks will be included in a breakfast box that’s offered to all passengers flying economy class for those American Airlines flights, so the pact is a reoccurring revenue stream for the year-long deal that could have an even longer runway if successful.

NatureBox co-founder and Chief Executive Gautam Gupta told Fortune the pact was important for the NatureBox to prove its brand can live “online as well as offline.”

“We see this as the first of many [partnerships] over the next several years,” Gupta said.

NatureBox’s core business is a subscription service, which sends five snack packs to an individual customer per month. But the company is thinking about delivery methods beyond the subscription service. Earlier this year, it started selling its snacks to corporate clients and has landed more than 200 customers, including Twitter and Square. The corporate business has resulted in 20%-30% growth month-over-month since it debuted, so NatureBox is encouraged by its early efforts to go beyond direct-to-consumer delivery.

NatureBox says it is seeing strong interest from retailers that could one day stock its products. The company, which sells jalapeño cashers, wholewheat blueberry fig bars and other healthy goodies that have fewer than 200 calories per serving, stays on top of food trends by leveraging data it gathers from the subscription service via customer feedback. It can quickly determine when a new flavor is a hit, or perhaps needs to be reworked if it doesn’t take off. The data can be helpful as NatureBox mulls opportunities to sell its brand outside the delivery business.

Still, the direct-to-consumer business model is a key to NatureBox’s success. NatureBox is expecting to ship 3 million of its snack packages this year, up from 1 million in 2013.

Gupta said the American Airlines pact puts NatureBox “in the hands of consumers that haven’t heard about us and gives them an opportunity to try our product.” He said NatureBox is just beginning to make a name for itself in the snacks aisle.

And there is a lot of room for the startup to grow. U.S. consumers — in particular Generation X, Millennials, and today’s teens and kids — are snacking more between and even at traditional meal time. Research firm NPD Group believes snack foods eaten at main meals will grow about 5% to 86.4 billion earnings in 2018.

NatureBox isn’t the only direct-to-consumer e-commerce company that is refusing to rely solely on a subscription business. Kiwi Crate, a company that sends monthly do-it-yourself kits meant for kids, is now stocking its items in over 1,700 Target stores. And like NatureBox’s Gupta, Kiwi Crate CEO Sandra Oh Lin has said she’s thinking about how she can expand her company’s brand to the retail channel.

“One of our challenges is getting Kiwi Crate into more hands and allowing the product to market itself,” Oh Lin said. “The retail channel helps address this.”

This article originally appeared on Fortune.com

Fiat Chrysler set to spin the brand off into a separate, independent company

Ferrari might be the car all people, even the strident non-gearheads, would love to be able to take out for a spin. Executives at the Italian automaker will be taking their company out for a spin next year, it was announced today, as Fiat Chrysler is spinning the brand off into an independent company.

Ferrari will also IPO, with a 10% stake in the company hitting the markets. The remaining 90% will be distributed among FCA shareholders, according to Reuters. Ferrari will likely list in both New York and on a European exchange. The spinoff and IPO is part of Fiat Chrysler’s attempt to grow by 48-billion euro ($61 billion).

“As we move forward to secure the 2014-2018 Business Plan and work toward maximizing the value of our businesses to our shareholders, it is proper that we pursue separate paths for FCA and Ferrari,” FCA Chief Executive Sergio Marchionne said in a statement.

Fiat Chrysler Automobiles made its Wall Street debut earlier this month, shifting the carmaker’s center of gravity away from Italy and capping a decade of canny dealmaking and tough restructuring by Marchionne.

The world’s seventh-largest auto group has sought the U.S. listing to help to establish itself as a leading global player through access to the world’s biggest equity market and the cheaper, more reliable source of funding it ultimately offers.

This article originally appeared on Fortune.com

The news of its massive quarter has finally settled in

It took a few days, but Apple’s blow-out quarterly earnings report — driven by strong iPhone and Mac sales and bolstered by the largest stock repurchase program in the history of capitalism — has finally made its way through Wall Street’s algorithms and into Apple’s share price.

The stock closed Thursday at $104.83, up 1.8% for the day, 7.2% for the week and 50% from April 2013, the cruelest month, when it dipped into the high 300s.

Speculators who bought a lot of calls in September 2012, when Apple was approaching an intraday high of $705.07 ($100.72 post-split), will never get their money back.

But investors who held on to their shares through the rout of 2012 and 2013 are back in the green.

Apple is now not only the world’s most valuable public company, but it has left the nearest contenders in the dust. The top four market caps:

Apple: $617.9 billion
Exxon: $401.4 billion
Microsoft $371.0 billion
Google $369.0 billion

Big spending and lower-than-expected forecast for the holiday season put a cloud over the e-commerce giant’s shares

Amazon reported a disappointing third quarter on Thursday in the period leading up to holiday season. Investors responded by pummeling the stock in after-hours trading, driving it down 10% to $280 a share. Here are the key points from the earnings report.

What you need to know: Amazon traditionally funnels much of its profits into expanding its already gargantuan business, resulting in razor-thin margins — and this quarter proved no different. The e-commerce giant reported a loss of $437 million on revenues of $20.58 billion, a 20% revenue increase year-over-year, but well below Wall Street’s estimate of $20.84 billion.

A significant chunk of that money went into content and technology — a spending area that jumped 40%. That’s unsurprising given Amazon’s announcement last quarter that it would spend over $100 million on original video content, including the well-received original TV show, “Transparent” with “Arrested Development” actor Jeffrey Tambor.

The big numbers: $27.3 billion and $30.3 billion. That’s the sales range Amazon expects for this holiday season, the company’s busiest time of the year. That represents growth of between 7% and 18% versus last year, but again, less than what analysts forecast.

What you might have missed: Amazon had an extremely busy summer. It acquired Twitch, the video-game streaming site, for $1.1 billion, unveiled a credit card reader for the smartphone called Amazon Local Register and brought its same-day grocery delivery service, Amazon Prime Fresh, to New York. Amazon also launched the Fire phone, which is widely believed to be a dud. On Thursday’s earnings call, CFO Tom Szutak suggested it was too early to call the Fire phone a failure given its launch just 90 days ago. Said Szutak: “When ever you launch something new, there’s a wide range of outcomes, but it’s also early.”

This article originally appeared on Fortune.com