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Amazon slashes price of Fire phone

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Amazon CEO Jeff Bezos introduces the new Amazon Fire Phone

SAN FRANCISCO >> Sixty thousand people vied to attend the unveiling of Amazon’s first smartphone in late June.

If only the retailer could persuade those fans — or anyone, really — to actually buy the device. The Amazon Fire is threatening to become the Amazon Fizzle.

On Monday, Amazon took a drastic step to avert disaster, announcing that it would charge 99 cents for the phone, basically giving it away if users signed a two-year contract with AT&T, the exclusive carrier.

Analysts said the drop from $200 was inevitable, but they were not sure it would help.

“If history is any indication, this doesn’t usually work,” said Wayne Lam, a senior analyst with IHS Technology. He noted that the so-called Facebook phone quickly dropped to 99 cents last year but never gained a foothold in the market.

The price cut gets the Fire phone closer to the company’s classic model of giving away hardware in the expectation that users will order enough from Amazon to make it worthwhile. Buyers of the phone still get a year of free Prime — Amazon’s shipping and video club, which normally costs $99.

The Fire, released in late July, is an expensive venture for Amazon. Thousands of employees worked on it for four years. Analysts initially expected sales of 1 million to 2 million units in the first year.

That is not much in the smartphone universe. Apple, which is releasing its new iPhone on Tuesday, surpasses that every week. But the Fire was nevertheless unlikely to get anywhere near that in its initial incarnation.

Amazon does not release sales numbers for its devices and declined to comment for this article. An AT&T spokesman also declined to comment on sales.

But at three Bay Area AT&T stores over the weekend, salesmen said that the Fire had performed dismally. “We got special shirts, staffed up for the launch — and then nothing,” said one salesman, who estimated his store had sold a total of 10 Fire phones. At a smaller store, two salesmen said they had sold exactly one Fire.

From just about any other company, a debut like the Fire would be embarrassing, or perhaps even painful. But Amazon is not like anything else. Even as it cut the price on Monday, it announced that it was expanding the phone to Britain and Germany.

“Amazon is a company that prizes innovation and experimentation, and it can handle one or two major flops a year without too much trouble,” said James L. McQuivey, an analyst with Forrester Research.

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