• by Mark Walsh  @markfwal, September 9, 2014

Talk about a price drop. Amazon’s move to slash the price of its Fire phone from $200 to 99 cents less than three months after launch is so dramatic as to be almost comic. You can almost picture Amazon CEO Jeff Bezos in Crazy Eddie mode, hawking the phone on late-night TV. It’s no exaggeration to say Amazon is practically giving the phone away (with a two-year contact).

It also begs the obvious question: Why didn't the company just price at under a buck to begin with? “My guess is this thing is such a dud that they’re just trying to dump inventory now,” suggested Daring Fireball’s John Gruber, in a post following the Amazon pricing announcement, released the day before Apple’s expected unveiling of the iPhone 6.  

If nothing else, though, the move makes plain Amazon’s razor-razorblades business model for the Fire phone — offer the e-commerce-tailored device essentially for free in order to sell more stuff from its virtual aisles from digital movies and games to diapers to outdoor grills. After all, it features Firefly — its image recognition technology to make it easier to buy items on Amazon — and comes with a year’s free subscription to Amazon Prime.

As Forrester Principal Analyst James McQuivey said when the Fire phone was rolled out in June: Amazon cares about phones only as a means to a digital relationship end, a way to make sure customers think of Amazon not just a few times a month, or even a few times a week, but dozens of times a day.” In other words, putting the world’s biggest store in your pocket, ready to satisfy an impulse buy at any moment.

That was the thinking, anyway. By cutting the price to almost nothing, Amazon obviously hopes to lure more customers into giving the 32-gigabyte version of its handset a try. But as eye-catching as the step is, it may not help much. It can’t change the fact that Amazon’s Appstore still doesn’t offer nearly the number of apps as Google Play and Apple’s App Store, each with over 1 million, respectively.

A Consumer Reports review, while otherwise calling the Fire phone “a very good smart phone,” said that even “diehard Amazon shoppers” might also be turned off by battery life shorter than on many other handsets. And while Amazon is getting a brief burst of publicity for selling a 99-cent smartphone, the buzz is likely to be soon drowned out by the media clamor around Apple’s event today.

And even if someone doesn’t want to pay up for the new iPhone, they may have a “new” older model they can get for free when the new device goes on sale. Amazon is learning fast just how bruising the smartphone business can be.