Amazon’s hardware unit sentiment is flagging amid cutbacks and a weak development pipeline

SAN FRANCISCO (Reuters) – Some workers at Amazon Inc’s (AMZN.O) devices division – responsible for popular devices such as the Kindle reader and Echo voice assistant – say morale within the division has suffered amid staff cuts and a host of devices in development. Which they fear is unlikely to succeed.

The division, known as Lab126, had been the focus of Amazon founder Jeff Bezos, who portrayed it as an engine for future projects, but more recently it has been hit by mass layoffs and the departure of key executives, including leader Dave Lemp, who has served for 13 years. The veteran has announced plans to step down later this year.

Reuters interviewed more than 15 current and former employees, who spoke on the condition of anonymity due to the terms of their employment, and who described a patchwork of new devices in development, many of which were aimed at encouraging customers to use the once-leading Alexa voice service that now faces a strong challenge in… The era of Generative AI and ChatGPT.

The company – the world’s largest online retailer – is holding a device and service launch event on September 20 where it is expected to showcase updated versions of some existing products like the Fire Tablet, Fire TV Stick, and Kindle Scribe e-reader, among other announcements. Reuters was unable to determine Amazon’s full advertising plans.

The news agency was able to identify five different new devices under development. These devices include a carbon monoxide detector and a home energy consumption monitor — both of which have Alexa built in — as well as a home projector to turn any surface into a screen. Some sources mentioned other projects, the full details of which could not be confirmed.

Amazon hopes consumers will install Alexa-enabled devices in more rooms of their homes and get used to using the system throughout the day, the sources said.

The company also worked on an Alexa-enabled digital measuring device (for example, to draw a home’s dimensions) and a virus testing device that was initially intended to detect the coronavirus, the people said.

Amazon is tight-lipped about its internal projects at Lab126, which have long been crucial to its quest to position itself as a technology innovator. Not all of them will be commercially produced, sometimes due to financial or market concerns, while some have already been reformulated or canceled altogether, the sources said.

Although relatively small within Amazon’s sprawling empire, the device unit was symbolically important as a hardware testing ground and a public face for Alexa through its voice assistants. Amazon said its hardware and services business is not profitable, without providing numbers.

An Amazon spokesperson declined to comment on the products under development.

“To suggest that some anecdotes paint a picture of reality for an organization as large and diverse as Devices and Services is inaccurate,” spokeswoman Kinley Pearsall said in a written response to questions about morale and hardware at Lab126. “The business has been a staple of innovation for more than a decade and has created a series of products that are meaningful parts of people’s everyday lives.”

The sources said that the laboratory’s years of losses and changing strategies contributed to low morale. Many pointed to the Astro home monitoring robot launched in 2021, which is still relevant at $1,600, and has been criticized for giving some consumers a sense of intimidation.

This came after a series of poor-selling devices, such as the voice-assisted watch, the Fire smartphone, and a camera that also doubles as a personal stylist, the sources said.

Amazon is trying to address flagging interest in its Alexa voice assistant nearly a decade after its launch, and as it faces competition from AI chatbots powered by Alphabet Inc’s Google (GOOGL.O) and a host of startups, including… Supported by Microsoft. (MSFT.O) OpenAI. ChatGPT and other similar tools have dazzled consumers and investors since late last year with their ability to generate long, coherent text answers to complex prompts, a format that is difficult to translate to a voice assistant.

Amazon said it was developing its own generative AI to support Alexa, but didn’t reveal much beyond an August assertion that “everyone of our teams is working on building generative AI applications.”

Alexa is typically accessed through devices such as Amazon TVs and Echo speakers, provides spoken answers to questions and can be used for purchases from Amazon’s online store. The company has also made Alexa a home automation hub to allow voice control of light bulbs and appliances.

But Amazon has failed to find a consistent way to leverage Alexa.

“Amazon’s ability to penetrate consumers’ lives is limited because they don’t have control over smartphones,” said Avi Greengart, president of analyst firm Techsponential. “Voice first is not a great shopping experience,” he said.

Exodus

Limp, who oversaw hardware strategy including Ring video doorbells, plans to exit before the end of the year. Amazon is set to appoint Microsoft’s Panos Panai as his successor, who oversaw Surface development, according to Bloomberg. Microsoft declined to comment, and Amazon did not respond to a request for comment.

Limp follows longtime executives Lab126 President Greg Zahr and Alexa Senior Vice President Tom Taylor who retired late last year. Ken Washington, who oversaw Astro, left after less than two years to join Medtronic in May.

CEO Andy Jassy has cut headcount at Amazon after nearly doubling it during the pandemic in response to surging online sales. The downgrade also affected Amazon’s retail unit, cloud computing, grocery and advertising divisions.

Alexa employees were included in rounds of layoffs that began last year that resulted in 27,000 job cuts across Amazon. Although voice assistants have become more widespread, Alexa, with 71.6 million users in 2022, trailed only Google and Apple’s Siri, which had 81.5 million and 77.6 million, respectively, according to analyst firm Insider Intelligence.

For years, Amazon said it could sell devices at close to production cost and make a profit through the services offered on them. This has worked well for the Kindle range, where consumers who own an e-reader have been purchasing e-books for years, with Amazon taking a cut of each sale.

Alexa is another matter. Most efforts to make money from it have focused on making it easier to purchase from Amazon.com. But dozens of people who have worked on Alexa say they haven’t seen strong evidence that customers are buying things they wouldn’t have bought otherwise.

The challenge is for users like Bruno Borges, 40, from Vancouver, Canada, who said he found he only used his Echo for timer, music and weather updates.

“I would never shop from him because I can’t compare things like what’s on the website, so I wonder if I’ll get the best deal,” he said. He recently stored his three-year-old device in a drawer and has no plans to continue using it.

Employees say the leadership has shifted in recent years toward the direction of producing cheaper devices to make money from selling the devices themselves.

This focus on price has delayed an advanced projector Amazon is developing to project images around a room, turning ordinary surfaces into screens, according to five people familiar with the matter.

Using the projector, the user can project recipes onto the wall above the stove or make Zoom calls to track them as they move. Amazon bought a startup called Lightform to help advance the project but is determined to cut the cost of the projector, which Lightform previously offered at a starting price of $700, by hundreds of dollars before it goes on sale.

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