Normally, price cuts are a good thing. It drives up consumer demand and people, who are on the fence in buying a particular gadget, finally get that push that they need to uphold the trigger and buy the gadget that they’ve been considering for a long time. This is particularly true of Smart Phones.
Smart Phones’ published prices in package plans, are normally subsidized by the carrier and user can pay low amount and low prices were they even have to pay no money on the phone or even free. In exchange, they’re locked in for several months normally two years, with a particular carrier. What makes Nokia’s price cut for the Lumia 900 particularly interesting, is the steep cut. It’s a 50% price reduction. Originally, the device launched last April at $99 with a two year plan with AT&T is now $49.99. While this might get some people excited and might even make some analyst think that Nokia is launching a marketing blitz, it may be too soon to tell. Most of these deals are subsidized by the carrier so while Nokia slash the price by 50%, there are no public details regarding if whether Nokia absorbed the 50% or it was split between AT&T and Nokia. This is a very important concern for followers of Nokia’s stock as well as users of Nokia phones. As you are probably aware, Nokia used to be the market leader in global Smart Phones. Everywhere you look whether it’s in the South Africa, the Philippines, North America or Europe, Nokia was up there in terms of market saturation, brand recognition and over all mobile phone dominance. In fact, in terms of sheer volume of mobile phones, Nokia is still a leader. The problem is, mobile phones are quickly shifting to the smart phone category. Consumers, when they buy a Smart Phone, rarely want to go back to regular mobile phones. The issue then turns to whether these price cut benefits Nokia or it’s just a stop gap measure while the company is bleeding. Its second quarter earnings are due out soon and there’s a lot of concern regarding this Finnish company’s long term prospects. Just like research in Motion’s Blackberry, Nokia phones are quickly declining in popularity. Its Lumia line of Smart Phones powered by Windows phone generated decent sales. In fact, its sales volume grew year over year. The problem is, its growth is not enough to keep Nokia float. Moreover, the Microsoft announced that current Nokia phones can’t upgrade to the upcoming Microsoft OS Windows 8. This is a major blow to the current Lumia users. Nokia did announce that there will be some sort of upgrade for the current Lumia users even though it won’t be to Windows 8. All told, Nokia has lost almost 95% of its stock value ever since its peak days in the early 2000s’s. It would be interesting to see if Nokia can claw its way out of this digital hole. Apple’s I phone was a true game changer that revolutionized not just the Smart Phone market but also the computing Cloud services market.
Such technological shifts happen very quickly and often times, some of the casualties are large established companies that used to make a lot of money and used to be household names are now no more. Do you remember ITT? I thought so. For some of the Nokia fans out there, let’s hope Nokia can come up with a winning strategy soon.