Nokia Needs to Tread Very Carefully Here

John Grgurich, The Motley Fool
Updated

It's official. Nokia's (NYS: NOK) new Lumia 900 will go on sale March 18 for the surprisingly low price of $99.99, but the company needs to be very careful. While a low price may seem helpful in the short run, it can be hurtful in the long run.

Hit me with your best shot
The phone will launch exclusively on the AT&T mobile network and will require a two-year contract. As the flagship smartphone for the U.S. market, the Lumia 900 is designed to compete at the high end of the product range:

  • It's the first Microsoft (NAS: MSFT) Windows Phone smartphone to support 4G LTE.

  • It has a top-notch camera with Carl Zeiss optics.

  • It has a front-facing camera, to facilitate mobile video chatting.

  • It has 16GB of internal memory and a sleek polycarbonate case.

  • At 4.3 inches, its screen is bigger than that of the Apple (NAS: AAPL) iPhone 4S.

In terms of pricing, comparable Google (NAS: GOOG) Android devices, such as the Motorola Droid Bionic and Samsung Galaxy Nexus, which also support 4G LTE, made their debuts with $299 price tags. The iPhone 4S, Apple's latest model, starts at $199 with a two-year contract.

Once more, please; this time with dignity
In terms of U.S. market share, Android phones and iPhones are running neck and neck, right around 45%. Research In Motion's (NAS: RIMM) once-mighty BlackBerry is hanging on by a thread, polling right around 6%. Nokia/Microsoft phones didn't poll at all.

As such, Nokia is staking a claim in the smartphone market with this phone at this price. It was designed to go up against the best of the best at a price that might make the average consumer think twice before automatically going iPhone or Android. And Nokia needs to stake a claim, as does Microsoft. Both need the Lumia line of smartphones to get them back up and running in the fast-growing and enormously profitable smartphone sector.

But Nokia needs to be careful. The company has the chance here to build some real brand cachet here -- something that, if it ever had it, was lost while blanketing the world with cheap feature phones. The right price for this truly beautiful, feature-packed handset, running an operating system that is markedly different from anything else out there, is company's chance to turn things around, financially and perceptually. Both can go together and can work wonders as a team, as Apple has shown. The $99.99 price is probably fine, but this Fool hopes that the 900 doesn't start popping up for free. "Free" equals "cheap" in the minds of many consumers. Companies don't often get a second chance. Let's hope Nokia makes the most of this one.

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At the time thisarticle was published Fool contributorJohn Grgurichworked in the cell-phone industry when the latest and greatest handheld phone was still lovingly referred to as "the brick," but he owns no shares of any of the companies mentioned in this column. The Motley Fool, however, owns shares of Google, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Microsoft, and Apple and creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a scintillatingdisclosure policy.

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