The Echo business has always looked like Amazon playing the long game from the outside. Above all, the company’s home consumer hardware is a convenient vessel for getting Alexa into millions of homes. But when a corporation is doing some serious belt tightening amid broader economic headwinds, no divisions are safe from cost cutting — certainly not one that is reportedly operating at a $5 billion a year revenue loss.
The Wall Street Journal this week noted that Amazon’s devices group could be the latest to get hit with cuts as the company braces for further macroeconomic disruption. The paper notes that “Amazon’s leadership is closely evaluating its Alexa business, according to some of the people,” citing internal documents.
Many of the cutbacks thus far have been focused on longer-tail products. Devices is a mature division for the company, however, encompassing a wide range of Echo home devices, Fire tablets and Kindles, among others.
Amazon offered TechCrunch a fairly boilerplate response to the report, while noting that the normal performance review is certainly being impacted by the overall financial climate.
“We remain excited about the future of our larger businesses, as well as newer initiatives like Prime Video, Alexa, Grocery, Kuiper, Zoox, and Healthcare,” the company writes. “Our senior leadership team regularly reviews our investment outlook and financial performance, including as part of our annual operating plan review, which occurs in the fall each year. As part of this year’s review, we’re of course taking into account the current macro-environment and considering opportunities to optimize costs.”
A second comment, meanwhile, highlights Alexa’s overall successes:
Alexa started as an idea on a whiteboard. In less than a decade, it’s turned into an AI service that millions of customers interact with billions of times each week in different languages and cultures around the world. Even in the last year, Alexa interactions have increased by more than 30%. We’re as optimistic about Alexa’s future today as we’ve ever been, and it remains an important business and area of investment for Amazon.
Andy Jassy has been tasked with cutting costs across the firm — not an enviable task in any economy. In his 2021 shareholder letter, the CEO took a trip down memory lane, beginning with the first Kindle in 2007, while highlighting the ups and down of the category, including a little insight into the life (and death) of Fire phone, noting, “The phone was unsuccessful, and though we determined we were probably too late to this party and directed these resources elsewhere, we hired some fantastic long-term builders and learned valuable lessons from this failure that have served us well in devices like Echo and FireTV.”
Jassy also highlighted the division’s evolving future, writing:
Our goal is for Alexa to be the world’s most helpful and resourceful personal assistant, who makes people’s lives meaningfully easier and better. We have a lot more inventing and iterating to go, but customers continue to indicate that we’re on the right path. We have several other devices at varying stages of evolution (e.g. Ring and Blink provide the leading digital home security solutions, Astro is a brand new home robot that we just launched in late 2021), but it’s safe to say that every one of our devices, whether you’re talking about Kindle, FireTV, Alexa/Echo, Ring, Blink, or Astro is an invention-in-process with a lot more coming that will keep improving customers’ lives.
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