Amazon has dismissed dozens of engineers and ditched a handful of hardware projects following its dismal attempt at tackling the smartphone market, according to a new report.

The retail giant has also restructured what’s left of its hardware division, combining what was two separate units into one.

“In recent weeks Amazon has dismissed dozens of engineers who worked on its Fire phone at Lab126, its secretive hardware-development center in Silicon Valley,” reports The Wall Street Journal, citing people familiar with the matter.

The exact number of people who have been laid off is unclear thanks to Amazon’s non-disclosure agreements, which prevents employees or former employees from revealing this kind of information. But it’s thought to be the first downsize the division has seen in its 11-year history.

Amazon has traditionally invested almost all of its revenue back into improving operations and developing new hardware, but the company has been forced to rethink its approach following the flop that is the Fire phone.

Amazon has been struggling to sell its debut smartphone since the device was launched last July, despite reducing it to as little as $130. An October report revealed that the company was sitting on $83 million worth of unsold inventory, with just 35,000 units sold in the first two months.

Amazon has insisted there will be a Fire phone 2, and although it has told some smartphone engineers that development has been shelved, one source says the company has shifted the project to Seattle where it is now being overseen by hardware executive Steve Kessel.

As for Lab126, morale is said to be low following the Fire phone flop, while wacky projects have “contributed to a frenetic workplace and ill-defined roles” that have encouraged a number of workers to take jobs elsewhere.

It’s thought some of the projects Lab126 was working on, including a new Fire tablet with a larger, 14-inch screen; a smart stylus named Nitro that can translate notes into digital shopping lists; and a device called Shimmer that projects images onto walls, have now been ditched.

However, Lab126 is still working on a high-end computer designed for the kitchen that’s code-named Kabinet, and a tablet with a glasses-free 3D display, somewhat similar to that of the Nintendo 3DS.

As a consumer, it seems Amazon’s biggest problem isn’t its hardware, but its software. The Fire phone could have been a great device if it was running stock Android, or at least had access to Google apps. But instead, Amazon insists on sticking with its own Fire OS, which only allows apps that have been downloaded from the Amazon Appstore.

• SourceThe Wall Street Journal