Amazon's Fire sale: Phone is now just $199 unlocked

Amazon has cut the price for its unlocked Fire smartphone, on sale for just four months, by 69%.

Amazon has cut the price for its unlocked Fire smartphone by 69% just four months after the phone first went on sale.

The company also just deleted thousands of negative online customer reviews of the smartphone on its website.

The latest discount first appeared on Amazon.com on Tuesday, dropping the unlocked 32GB price from its original $649 to $199; the price still includes one year of Prime service, worth $99, and is good through Cyber Monday (Dec. 1).

In addition to the price cut, Amazon deleted thousands of customer reviews of the product, leaving up only reviews posted since the price cut went into effect.

Just one review appeared as of noon ET Wednesday: "Dan" gave the Fire four stars out five and called the $199 price "awesome," adding that he wished it ran pure Android. (It runs the Fire OS, an Android variant.)

An Amazon spokeswoman said there weren't more reviews because the revised unlocked version just launched Tuesday on its Web site. She said it has been upgraded with added features such as text translation, a secure corporate VPN and user interface and performance improvements; those added features will be rolled out to existing Fire customers over-the-air in coming weeks, she added.

By comparison, customer reviews back in late October scored the device with just 2.4 stars out of five, based on nearly 4,000 reviews.

Various negative complaints included access to too few apps and concerns that the Fire got hot to the touch. Some users called the phone "gimmicky," pointing to various innovative features like Firefly for instant access to information on products and objects, customer support with Mayday and a sensor system with 3D-like capabilities called Dynamic Perspective.

Before Tuesday's change, Amazon had already slashed the price (in September) from $649 to $449. That same month, the locked -- or subsidized -- price with AT&T on a two-year contract went from $199 to 99 cents for the 32GB model. That price continues today.

Why the change? Poor customer response, bad initial pricing and a highly competitive smartphone market.

Customer reaction

The numerous early negative customer reviews speak for themselves. Reviewers and analysts immediately slammed the phone for adding features like Firefly that make it seem mainly as a way to funnel buyers to Amazon's Web site for purchases.

AT&T's Mobility CEO Ralph de la Vega put it in perspective at a June launch event, noting, Firefly's "only danger is clicking one too many times to buy things."

The Mayday button, however, got the most praise, for making it simple to connect with video access to customer support in 15 seconds.

Poor Fire phone reviews by customers, testers and analysts appear to have taken their toll on sales, leaving $83 million worth of unsold phones at the end of October. The company disclosed at its last earnings call that Amazon had taken a $170 million charge, mostly associated with the Fire phone and related supplier costs.

Fire's innovative features were undervalued by customers and too difficult to market, said Patrick Moorhead, an analyst at Moor Insights & Strategy. There were too few 3D video titles, despite Amazon's promotion of that capability, and Firefly was indeed "intended to help you buy more goods from Amazon, which just wasn't valued," he said.

Removing the older customer reviews, even as Amazon argues that the Fire phone site has been re-launched, "calls into question Amazon's transparency and honesty, which is a shame," Moorhead said. Cloaking bad reviews is, in Amazon's mind, a way to increase the chances of selling the Fire phone, he added.

Initially overpriced?

Part of the drastic 69% price cut in the Fire phone could be due to initial overpricing.

Amazon Senior Vice President of Devices David Limp told Fortune in October that "we didn't get the price right." He said Amazon customers "come to expect a great value and we sort of mismatched expectations. We thought we had it right, but we're also willing to say, 'we missed.' And so we corrected."

Limp made that comment before the second price cut was unveiled on Tuesday, so it doesn't explain the latest move other than as a response to more serious sales problems. Amazon was asked to comment, but didn't respond.

Amazon had priced the unlocked version initially at $649, keeping it in line with many top-of-the-line phones.

Limp was also quoted at that time saying Amazon would improve software features in the Fire and offer future releases. Amazon has had a number of device successes, with the Kindle e-reader and its Fire tablets, which would favor future success with the Fire phone.

An Amazon spokeswoman on Wednesday said the new listing of an "unlocked" Fire phone at the lower price corresponds to Amazon's efforts to "listen to customer feedback" about the desire to have it unlocked from any GSM carrier. (However, the previous version of the Web site did include a 32GB unlocked variant.)

Heated competition

It might not be fair to pick too much on the Fire, given heavy competition in the smartphone market -- especially in the U.S.

Analysts believe that many customers held off considering a first-time phone from Amazon because there were so many capable alternatives coming from seasoned veteran manufacturers like Apple and Samsung. The iPhone 6 and iPhone 6 Plus were announced in September, and the Samsung Galaxy S5 had already appeared in April.

Samsung has had trouble with the Galaxy S5, reportedly selling a quarter fewer S5s in its first three months than Samsung sold S4s over the same period after its launch.

Given the competitive environment and because it was its first phone, Amazon might well have started at a much lower price.

"The key to premium phone success is to add enough customer-valued differentiators to warrant the price," Moorhead said. "Yes, Amazon priced the Fire phone too high, but had the special features been valued, that wouldn't have been the case."

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