Nokia Drops Prices Too Much

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A promotion of the new Nokia Corp. (NYSE: NOK) Lumia 920 is on the front page of the AT&T Inc. (NYSE: T) main website. The price is $99.99 with a two-year subscription plan. That price is well below many of the smartphone’s direct competitors. That may help move the product, but will Nokia lose money on each unit? And does it cheapen the Lumia and give the impression that Nokia is desperate to clear inventory to post good sales figures? The Lumia cannot be a winner for Nokia at $99.99

Second- and third-tier smartphone companies sell for $99.99 at the AT&T site. This includes the HTC One X, Sony Corp.’s (NYSE: SNE) Experia TL and the ancient Apple Inc. (NASDAQ: AAPL) iPhone 4S. Aside from Apple, the other two companies have a diminishing presence in the smartphone business. Price is the only advantage they have to offer as they are clobbered by the iPhone 5 and Samsung Galaxy S III. By pricing the Lumia 920 so low, Nokia has told the public, the smartphone industry and its investors that it cannot effectively compete in a market it lost long ago, with the introduction of the original Motorola RAZR and early versions of the Research In Motion Ltd. (NASDAQ: RIMM) BlackBerry.

Nokia probably cannot guess the tipping point at which price potentially will pick up market share. It may be that the Lumia will be popular enough to have been priced at $199 with out damaging demand. That price would at least be respectable. Or sales may be low enough the $199 shows that Nokia has conviction that the Lumia 920 is a superior product no matter what the sales results are.

In any event, all Nokia has said with its $99.99 Lumia 920 price tag is that its chances of success are gone before people can even get their hands on the product.

Douglas A. McIntyre

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