Guess who's back in town? Yes, it's that once-ubiquitous Finnish cell-phone maker Nokia (NYS: NOK) . Though the company still sells a lot of devices, it was long ago trumped in the U.S. by Apple's (NAS: AAPL) sleek iPhone and the cheaper models built on Google's (NAS: GOOG) Android operating system. To fight back, Nokia will attack the market through price: Its new Lumia 900 smartphone that is about to hit the shelves will retail for $99.99.
It's a bold move, and one that could possibly land plenty of Lumias in the hands of American consumers, many of whom remain price-conscious after the hangover of the recent recession. Even with this slick new weapon, however, Nokia has a long way to go to carve out significant market share here.
Stay current or fall behind
Once upon a time, Nokia was the world's cell-phone maker. The near-ubiquity came from the company's clever marriage of operating system and hardware; users manipulated a small set of keypad buttons to move through their phone's functions. This was an elegant and intuitive way to provide the limited phone options available at the time.
In the tech world, though, change happens in split seconds, and it's easy to get left behind. Nokia stuck with its system for years, well into the dawn of smartphones. When the first iPhone was introduced in 2007, it featured the touchscreen interface that consumers rapidly came to expect from such devices. The world moved to swipe-and-pinch while the Finnish company stubbornly remained push-and-scroll.
Similarly, Apple's earth-shifting new product moved the cell-phone ecosystem away from hardware toward software. These days, while users still appreciate owning a nice high-tech toy, one big consideration in their purchase is the availability of apps. Smartphones are essentially little computers, and as with any computer, a user wants a machine that can run lots of different programs. Nokia offered few outside the default offerings of its increasingly archaic operating system.
No sticker shock here
Considering that it's rather late to the party, Nokia's making a good and sensible move in pricing the Lumia at just under $100 with a two-year contract from service provider AT&T. That makes it a compelling value compared to other budget options like Google subsidiary Motorola Mobility's (NYS: MMI) recent-generation Droid 3, a roughly comparable phone that is 50% more expensive.
Nokia will, however, be selling into a rapidly maturing market. Smartphone penetration reached nearly 50% of the wider U.S. phone market in February, according to research firm Nielsen, and with every passing day, the big guys get bigger and grab more share. Apple's phone shipments reached 93 million in 2011, nearly double that of the previous year. Nokia was still the king of the world with 417 million shipments, but that number was 8% lower than what it was in 2010.
Lumia will run on the neat tile-based Windows Mobile OS, however that might be more hindrance than help. The unpopular OS has only a tiny slice of the market, providing the brains for less than 1.5% of the smartphones shipped last year. Google's Android, meanwhile, had a commanding 49%, while Apple's iOS came in at a sturdy 19%. Windows Mobile, like Nokia, is laboring to catch up with the market.
So the company's got its work cut out for it. American success is necessary if the firm's to reverse its declining sales and recent losses. It's almost a non-presence in this market -- North American sales were barely 1% of the firm's grand total in 4Q 2011, for example -- and it needs to be, fast. The $99 smartphone will help in that attempt; hopefully for the company the effort won't be too little, too late.
If Nokia's going to pull off a turnaround, it's going to take a long time. In the meantime, there are better ways to capitalize on the mobile revolution. This report names a company that's powering the devices from the inside. Get the free report now.
At the time thisarticle was published Fool contributor Eric Volkman holds no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Nokia. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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