Amazon’s Hardware Division Overhauled Following High-Profile Fire Phone Flop

Amazon had high hopes for its Fire Phone; especially after the success it's seen with its Kindle and Kindle Fire tablet releases. Unfortunately for Amazon, it's not as easy to compete in the mobile phone space, and to compound the problem, Amazon now admits that it priced its Fire Phone all wrong at launch. This was a pretty big flop for Amazon, and probably not by coincidence, it's now being reported that Amazon is reorganizing operations at Lab126, its R&D group based in Silicon Valley.

News of the reshuffle comes from Fast Company, which cites multiple unnamed sources that are supposedly familiar with Amazon's efforts. Those sources say that the changes have been a long time coming, with a former high-level employee calling Lab126's organizational structure "bloated" and "inexplicable."

What exactly led to this point is a topic of debate. Some blame the failed Fire Phone effort, though others say the reorganization amounts to Amazon CEO Jeff Bezos wanting to double down on his company's efforts and focus on consumer electronics. If that's the case, then it represents a huge leap of faith in Lab126, as well as a gamble that it can grow to compete with Apple and Google in areas the two rivals currently dominate.

Some of the changes have already begun. For example, Malachy Moynihan, Lab126's former VP of digital products and head of Amazon's Fire TV and Echo products, left the company to pursue another opportunity. And Ian Freed, Amazon's VP of devices who oversaw the Fire Phone's marketing campaign, is taking a sabbatical following poor sales of the handset that Amazon had such high hopes for.

Bezos would do well to communicate with staff what exactly is going on. Not only is there confusion over whether these moves are a vote of confidence in Lab126, but some within the organization say it feels like the R&D division is "in the doghouse" and that "Jeff is taking out his frustration with the failure of the Fire Phone" on high level management.

Regardless of the reasoning, Bezos isn't giving up on hardware. Instead, he plans to invest $55 million in Lab126 by 2019, along with increasing the number of employees to over 3,700. That's quite a leap for a division that had just 100 employees five years ago.