Friday Oct 24th, 2014
Amazon lost $170m on unsold Fire Phones
Charles Arthur [The Guardian]
Amazon is writing off $170m on unsold inventory of its Fire Phone, the smartphone it launched in July but which has seen disappointing sales.
The announcement comes after Guardian estimates that the phones had sold only around 35,000 units more than a month after its launch in the US. Successful handsets typically sell more than a million units in their first month.
The Fire Phone incorporates a number of new technologies such as eye-tracking cameras but has seen poor reviews both from professionals and buyers: it has an average rating of 2.1 out of 5 stars from 3,100 reviewson the site, with buyers complaining they cannot get apps they had on previous Android phones and that they can’t use Google Maps, YouTube or Google Music because it runs a “forked” version of Google’s Android.
Amazon unveiled the Fire Phone in June, but observers noted that its off-contract price of around $600 was about the same as a top-end iPhone or Samsung device, but with fewer reasons to buy it. Like the priciest iPhone, it initially cost $200 with a contract from AT&T - the only US network that sold it - but the upfront cost was slashed at the start of September to just 99 cents.
The writedown is not mentioned in Amazon’s formal third-quarter earnings statement released on Thursday evening, in which it recorded a $544m operating loss on revenues of $20.6bn.
Instead, it was only mentioned on the subsequent earnings call with analysts, when chief financial officer Tom Szkutak noted that the “consolidated segment operating loss includes charges of approximately $170m, primarily related to the Fire phone inventory evaluation and supplier commitment cost.” Szkutak said that at the end of September “we had approximately $83m worth of [Fire Phone] inventory on hand”. He also said that $25m of the writedown was outside the US.
Skzutak didn’t say what value Amazon now attaches to each phone, though a $200 cut from its $600 upfront cost - as happened at AT&T - would imply an expected $400 revenue from each.
That suggests Amazon has about a minimum of 207,000 unsold phones, now worth a total of $83m, in its warehouses. If Amazon’s expected revenue from each phone is lower - such as $240, which would be a typical wholesale price for a $600 device - then it could have up to 346,000 unsold phones.
At a $200-per-phone writedown, the “international” writedown of $25m suggests 125,000 as-yet unsold phones held by carriers and Amazon outside the US.
The remaining $62m of the writedown would probably have gone to AT&T to fund the $200 price cut, suggesting that the carrier had 310,000 unsold Fire Phones.
Supplier, no buyer
The “supplier commitment cost” is money that Amazon had promised to pay the maker of the handset - which has not been publicly stated, although some believe that it could be Taiwan’s HTC, which was previously a contract handset manufacturer for Windows Mobile devices before branching into Android phones. Update: the manufacturer is not HTC, according to Amir Efrati, who has written on the topic for The Information.
But with so many Fire Phone handsets apparently unsold, it is unlikely that there will be further orders before Amazon clears its inventory. With the Christmas buying season approaching, that may be possible - but it will also be competing against better-known phones from a variety of manufacturers.
Inventory writedowns can be calamitous for both the vendor and the manufacturer, unless they can afford the lost revenues as prices are slashed and orders cut back. BlackBerry took a $485m inventory charge on unsold PlayBook tablets in December 2011, and a further $934m charge on unsold Z10 handsets in September 2013 - with the former propelling it downwards into losses, and the latter sealing the fate of its then chief executive Thorsten Heins.
South Africa: Gambling board 'blew cash on Vegas trip'
South Africa's gambling board has been suspended for seemingly overspending on foreign travel, including a trip to Las Vegas, it's reported.
The board spent 4.1 million rand ($374,000; £233,000) on trips abroad in three years, including visits to Turkey, Singapore and France, the Times Live website reports. The biggest chunk of cash was spent on flying seven of its members to a Las Vegas gaming conference in 2011, at a cost of more than 936,000 rand ($85,000; £53,000), according to South Africa's trade and industry minister, Rob Davies.
The board members' spending habits came to light after a parliamentary question on the details surrounding their suspension, which happened in September. They have allegedly contravened the Public Finance Management Act by "failing to prevent irregular, fruitless and wasteful expenditure," the website reports. Aside from regulating the gambling industry, South Africa's National Gambling Board exists to "to preserve the integrity of South Africa as a responsible global citizen," according to its website.
The Link Between Eating Well and Mental Health
Should the Hippocratic maxim “Let food be thy medicine” apply to mental health care? Absolutely, says Dr. Bonnie Kaplan, a professor at the University of Calgary and a pioneer in a resurgent field of research on the role diet and nutrition play in the health of the brain. She says the medical and psychiatric community is rediscovering the many connections between food and mental illness after more than a half century of depending primarily on prescription drugs for relief.
“From around 1950 or so, there was an explosion of research on medications,” she says. “Big pharma took over the treatment of psychiatric illnesses, and we lost centuries of knowledge.”
Before that, we knew better. Kaplan points to the 1855 edition of The People’s Home Library—a standard on the bookshelves of homesteaders across North America in the late 19th and early 20th centuries. In it, author T.J. Ritter diagnoses the cause of most psychiatric conditions as “imperfect nutrition.” Ritter asserted that for most people, improving one’s diet could help improve one’s mind.
But 20th century mental health care providers too often missed the point Ritter—and Hippocrates long before him—were making, Kaplan says, by treating the mentally ill with supplements of one nutrient or mineral at a time.
“They were seeing mixed results, because that’s just ridiculous,” she says. “We need [the nutrients] all together in proper balance.”
We may soon see psychiatrists prescribing produce rather than Prozac, however, thanks to a fairly recent body of academic research showing food’s powerful effect on mental health. Kaplan has been a leader in this area, publishing several studies linking nutrient intake with improvement in mood disorders in both adults and children. In a 2012 study with colleague Karen M. Davison, Ph.D., R.D., published in theCanadian Journal of Psychiatry, the authors recruited 97 adults diagnosed with a mood disorder to record their diets and moods (how they felt throughout each day) over a three-day period. At the end of the study, Kaplan and Davison found that participants’ vitamin and nutrient intake was “consistently and reliably” associated with better moods and mental health.
Other studies have shown similar results and even pinpointed specific diets that appear to be associated with a healthier brain. Epidemiological studies, for instance, have linked a Mediterranean diet of mostly vegetables, fruits, nuts, and plenty of olive oil with better brain function. But the diet of good mental health doesn't start and end with rabbit food. In a 2011 analysis of more than 5,000 Norwegians, Michael Berk, a professor of psychiatry at the Deakin University School of Medicine in Australia, and his collaborators found lower rates of depression, anxiety, and bipolar disorder among those who consumed a traditional diet of meat and vegetables than among people who followed a modern diet heavy with processed and fast foods—or even a health-food diet of tofu and salads.
“Traditional diets—the kinds of foods your grandmother would have recognized—have been associated with a lower risk of mental health issues,” Berk told The Washington Post.
Let’s be real, though: A holistic approach to mental health care is necessary, and there are times when those living with various disorders need a pill (or three) alongside a plate of whole foods. But with a new, strong body of research in her corner and even a newly formed international research society, Kaplan dreams of a day when we’ve restored a proper balance between medical and nutritional mental health care—something Hippocrates would more easily recognize.
“In my ideal world, diet and nutrition is the primary treatment,” she says. “And medication is used as supplements.”