SAN FRANCISCO, Sept 19 (Reuters) – Some workers at Amazon’s ( AMZN.O ) once-legacy hardware division – responsible for popular devices such as the Kindle reader and the Echo voice assistant – say morale at the division has suffered due to staff cuts and a pipeline of devices under development that they fear are unlikely to prove hits.
The division, known as Lab126, was a focus of Amazon founder Jeff Bezos, who portrayed it as an engine for future projects, but recently it has been hit by layoffs and key executives, including chief Dave Limp, a 13-year veteran, who have announced plans to step down later this year.
Reuters interviewed more than 15 current and former employees, who spoke on condition of anonymity because of the terms of their employment, who described a slew of new devices under development, many of them aimed at encouraging customers to use the once-groundbreaking Alexa voice service there now faces a tough challenge in the age of generative AI and ChatGPT.
The company — the world’s largest online retailer — is holding a device and services launch event on Sept. 20, where it’s expected to feature 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 ascertain Amazon’s full plans for the announcement.
The news agency was able to identify five different new devices under development. These include a carbon monoxide detector and a household energy usage monitor – both with Alexa built into them – as well as a home projector to turn any surface into a screen. Some of the sources mentioned other projects, the full details of which could not be confirmed.
Amazon hopes consumers will install Alexa-enabled devices in more rooms in their homes and get used to using the system throughout the day, the sources said.
The company has also been working on an Alexa-enabled digital measuring device (for example, to map the dimensions of one’s home) and a virus-testing device originally intended to detect Covid, the people said.
Amazon is secretive about its internal projects at Lab126, which have long been crucial to its drive to position itself as a technology innovator. Not all of them will be produced commercially, sometimes due to financial or market concerns, the sources said, while some have already been reworked or canceled altogether.
Although relatively small within Amazon’s sprawling empire, the device unit has been symbolically important as a gadget testing ground and the public face of Alexa through voice assistant devices. Amazon has said its devices and services business is not profitable, without providing numbers.
An Amazon spokesman declined to comment on products in development.
“To suggest that a few 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 devices at Lab126. “The company has been a staple of innovation for over a decade, creating a range of products that are meaningful parts of people’s everyday lives.”
The sources said the lab’s years of losses and shifting strategies have contributed to low morale. Many pointed to the Astro home surveillance robot, which launched in 2021 and which, at $1,600, remains niche and was criticized for giving some consumers the creeps.
It followed a string of poorly selling devices such as a voice assistant-powered watch, the Fire smartphone and a camera that doubles as a personal stylist, the sources said.
Amazon, the people said, is trying to counter waning interest in its Alexa voice assistant nearly a decade after it launched and as it faces competition from AI chatbots from Alphabet’s ( GOOGL.O ) Google and a host of startups, including Microsoft -supported (MSFT.O) OpenAI. ChatGPT and other similar tools have dazzled consumers and investors since late last year with their ability to construct long-form and coherent text responses to complex prompts, a format that is difficult to translate to a voice assistant.
Amazon said it is developing its own generative AI to power Alexa, but hasn’t revealed much beyond an August assertion that “every single one of our teams is working on building generative AI applications.”
Typically accessed through devices such as Amazon televisions and Echo speakers, Alexa provides spoken answers to questions and can be used to make purchases from Amazon’s online store. The company has also been working on turning Alexa into a home automation hub, allowing light bulbs and appliances to be controlled by voice.
But Amazon hasn’t managed to find a consistent means to take advantage of Alexa.
“Amazon’s ability to infiltrate consumers’ lives is limited because they don’t have control over the smartphone,” said Avi Greengart, president of research firm Techsponential. “Voice-first is not a good shopping experience,” he said.
EXODUS
Limp, who has overseen device strategy including Ring video doorbells, plans to leave before the end of the year. Amazon is set to name as successor Microsoft’s Panos Panay, who oversaw the development of the Surface, according to Bloomberg. Microsoft declined to comment, and Amazon did not respond to a request for comment.
Limp follows longtime directors of Lab126, Gregg Zehr, and Alexa senior vice president Tom Taylor, who both retired at the end of last year. Ken Washington, who oversaw Astro, left after less than two years to join Medtronic in May.
CEO Andy Jassy has reduced Amazon’s headcount after roughly doubling it during the pandemic in response to surging online sales. The cut also affected Amazon’s retail unit, cloud computing, grocery and advertising divisions.
Alexa employees were included in layoffs that began last year, resulting in 27,000 job cuts across Amazon. Despite widespread popularization of voice assistants, Alexa, with 71.6 million users in 2022, trailed Google and Apple’s ( AAPL.O ) Siri, which had 81.5 million and 77.6 million respectively, according to research firm Insider Intelligence.
For years, Amazon has said it can sell devices at close to manufacturing costs and see a profit through services offered on them. That has worked well with its Kindle group, as consumers who own an e-reader have been buying e-books for years, with Amazon taking a cut of each sale.
Alexa is another matter. Most efforts to monetize it have focused on facilitating purchases from Amazon.com. But a dozen people who have worked on Alexa say they haven’t seen strong evidence that customers are buying things they wouldn’t otherwise.
The challenge is users like Bruno Borges, 40, of Vancouver, Canada, who said he found himself only using his Echo for clocks, music and weather updates.
“I would never trade on it because I can’t compare things like on the website, so I wonder if I’m getting the best deal,” he said. He recently stashed his three-year-old device in a drawer and has no plans to continue using it.
Employees say that in recent years, management has shifted toward a desire to produce lower-cost devices to potentially make money from selling the hardware itself.
That focus on price has caused delays for an advanced projector that Amazon is developing to throw images around a room and turn ordinary surfaces into screens, according to five people familiar with the matter.
With the projector, a user could post recipes on the wall above their stove or make Zoom calls that track them as they move. Amazon bought a startup called Lightform to help drive the project forward, but has been willing to drop the cost of the projector, previously offered by Lightform from $700, by hundreds of dollars before it could be sold.
Reporting by Greg Bensinger; editing by Ken Li and Claudia Parsons
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