Amazon Offers Fire Phone for 99 Cents to Boost Adoption

Amazon.com Inc. cut the price of its Fire smartphone to 99 cents with a two-year contract through AT&T Inc., seeking to boost adoption of the device six weeks after it went on sale.

The 32-gigabyte phone previously cost $199 through AT&T, the exclusive wireless carrier for the device and the second-largest mobile carrier in the U.S. The Fire phone comes with 12 months of free membership to Amazon’s Prime fast-delivery and media-streaming service, the Seattle-based company said today in a statement.

Amazon is slashing the price of the Fire handset a day before Apple Inc. holds an event where the iPhone maker is set to announce bigger-screen phones, people with knowledge of the matter have said. Competition in the smartphone industry is intensifying, leading to reduction in prices for some phones that aren’t selling as well. In May 2013, AT&T said it was considering whether to stop selling an HTC Corp. phone that integrates Facebook Inc. social-networking features after cutting the price to 99 cents.

Amazon’s doesn’t release information about the number of phones it has sold, said Leslie Letts, a spokeswoman for the Seattle-based online retailer.

The company’s stock declined 1.3 percent to $341.73 as of 1:07 p.m. in New York.

Big Spender

Brian Blau, an analyst at Gartner Inc., said Amazon’s price cut stands out because the drop was so steep and came so soon after the product’s debut. Such price reductions typically happen more gradually, he said.

“This isn’t a good sign for Amazon, but they aren’t ones to give up,” Blau said. “This was just not the right phone with the right features at the right price.”

The Fire, which went on sale in the U.S. on July 25, lets users capture information from items such as business cards and paintings, and allows them to give commands by tilting the device. The phone was designed to give users easy access to Amazon’s content and services, though reviewers have criticized its weak battery and lack of applications.

Amazon Chief Executive Officer Jeff Bezos has been investing billions as he pushes into businesses such as cloud computing, warehouses and gadgets -- spending that resulted in a loss that spooked investors last quarter.

Last month, Amazon said it would pay $970 million in cash to purchase video-game service Twitch Interactive Inc. in one of its biggest-ever acquisitions. The company last week also announced a new $2 billion credit agreement with Bank of America, indicating its spending plans will continue.