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Amazon CEO Jeff Bezos introduces the Fire Phone.

Following a lackluster debut for its new flagship smartphone, Amazon this morning announced that it is dropping the price of the Fire Phone to 99 cents with a two year wireless contract on AT&T.

Amazon has also dropped the price of the Fire Phone by $200 without a contract, from $649 to $449.

FirePhone-D-Right-App-GridThe price cut comes a day before Apple is expected to debut its new iPhone lineup, creating additional competition for the Fire Phone. The move appears designed to boost demand for the device, which has suffered from unfavorable reviews since its release in July.

“Fire is now 99 cents with a two-year contract, plus customers get one full year of Prime included,” said Ian Freed, Vice President, Amazon Devices, in a news release. “With access to all of the Prime content, Mayday, 32GB of memory and free unlimited cloud storage for photos, plus the exclusive Dynamic Perspective and Firefly features, Fire is another example of the value Amazon delivers to customers.”

The phone remains an AT&T exclusive in the U.S., but Amazon also said today that it is launching the device in the UK with the wireless carrier O2 and in Germany with Deutsche Telekom on Sept. 30.

Amazon had originally priced the phone at $199 on a two-year contract, touting the price as a deal given the built-in 32GB of storage, compared with 16GB for comparable phones of the same price. Amazon was also banking on the included year of Amazon Prime, which normally costs $99, to boost the value of the device.

The phone boasts a high-tech, 3D interface called Dynamic Perspective that uses an array of sensors to adjust the user’s view and let them navigate the phone by using specific gestures. In our testing of the device, we’ve found that the advanced navigational features get in the way of the experience as much as they enhance it.

One estimate put total sales of the Fire Phone at a mere 35,000 units after one month on the market.

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