Microsoft drops AT&T Lumia 635 smartphone to $39 -- off contract

Microsoft is pushing the AT&T Lumia 635 for Black Friday shoppers by lowering the price tag to $39 -- sans contract.

The Microsoft Store shows the Lumia 635 selling for $60 less than its usual price of $99. The phone, which launched in the US in July, is being sold contract-free, which means you aren't saddled with the usual two-year service agreement and can upgrade to another AT&T phone at any time.

There is one hitch. The 635 is presently out of stock online, though it it available at Microsoft's retail outlets. The company promises it will be back online for Black Friday shoppers.

"We have seen a great response" to this phone in black, a Microsoft spokesperson told CNET. "While we are currently sold out on MicrosoftStore.com, we encourage customers to go to their local Microsoft Store where the 635 is in stock. We will also have additional stock for Black Friday in stores and online, but...we expect them to go quickly."

Best Buy is also getting in on the act by cutting the price of the Lumia 635 to $40. The retail chain is selling the phone under AT&T's GoPhone prepaid plan. Available both online and at Best Buy retail stores, the sale will start at 5 p.m. on Thanksgiving Day and run through Saturday, according to a Best Buy rep.

Microsoft took ownership of Nokia's Lumia handset division in April for more than $7.2 billion. Windows Phone handsets, such as the Lumia, have struggled to gain traction, stuck with only around a 2.5 market share, according to market researcher IDC. By placing the Lumia lineup under its roof, Microsoft hopes to boost demand for its mobile operating system.

Microsoft has managed to squeeze more sales out of the Lumia lineup. For its fiscal first quarter, the company said it sold 9.3 million Lumia phones, up 5.6 percent from the record 8.3 million devices sold in the same quarter last year.

The Lumia 635 sports a 4.5-inch screen, but the display is limited to 854x480 pixels. Equipped with 4G LTE, the 635 comes with a 1.2GHz quad-core processor, a 5-megapixel rear camera only, 8GB of storage and a microSD card slot for additional storage.

An AT&T spokesperson confirmed that the phone is locked and will work only on AT&T's network.

According to CNET's review of the Lumia 635 : "It doesn't have the sort of slick, luxurious design you'd get from a top-end phone, nor does it have a particularly impressive screen or camera, but its cheap price and fun, colorful design makes it a decent choice if you're after 4G on a budget."

Updated at 9:40am PT with a comment from AT&T.