The E-3 [email protected] is a phone which also offers video phone calls, email and internet browsing. Initially priced at £99 it was reduced to £49 last Easter.
Critics of the device have pointed to the price of 12p for receiving emails as a major disadvantage compared to normal PC-based email.
Amstrad is writing down the value of stock worth £5.7m and will now seek to sell direct to national telecoms firms.
Julian Hewett, chief analyst at Ovum, said: "People will buy a cheap PC and get broadband rather than use a device like this. There is no role for an emailer or a videophone.
"It is the latest generation of many to fail at creating a market for video telephony. Even in large firms where they have videoconferencing suites it is rarely used."
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