Nokia Goes Low-Tech for Growth
Finnish company Nokia (NYS: NOK) is shifting toward a different strategy this time. Instead of focusing on the high-end smartphone market, it's turning toward the low-end market with a lineup of "Asha" touch screen phones running on its old Symbian platform. These devices, which somewhat mimic smartphones, are targeted mainly at emerging markets where consumers are very price conscious. Now you must be wondering why Nokia is suddenly thinking about the low-end market after introducing the top-notch Lumia, Microsoft (NAS: MSFT) Windows-based smartphones. Well, here's why...
Pounded from all sides
Nokia is surrounded by competitors. The Finnish company has got a pummeling from all sides, be it in the high-end smartphone business or the low-end mobile and feature phone business. One very noteworthy competitor being Samsung which recently displaced Nokia to reach the No. 1 position in terms of global mobile phone shipments.
On the other hand, companies like Huawei and ZTE have also given Nokia a run for its money by selling amazingly cheap touchscreen Android devices at sub-$100 price tags. And this in turn is giving pain to Nokia's outdated line of low-end feature phones. So, it made sense for the company to boost its lower-end division with cheap, yet feature-packed phones.
But will this really help Nokia?
Well, if you take a look at data released by research firm Gartner, Android smartphones have become extremely popular, with 56.1% of worldwide smartphone sales, in contrast to Symbian's meager 8.6%. So theoretically, you can expect cheap Android-based phones to outsell Nokia's non-Droid offerings. However, with the kind of brand image Nokia has earned in emerging markets such as India and China, the devices might do reasonably well.
Moreover, Nokia's Lumia line of smartphones aren't really doing very well in the market. According to International Data Corporation (IDC), Nokia shipped 2.2 million Lumia smartphones for the quarter ending March this year. That's in contrast to shipments of 35 million Apple (NAS: AAPL) iPhones for the same period. But since Lumia is still relatively new in its product life cycle stage, you could say that such a comparison with the iPhone does not make sense. Thus, while Nokia ramps up sales of its Lumia smartphone device, it also needs to ensure that its cash cow -- the non-smartphone mobile segment -- is at the top of its game.
The Foolish bottom line
While introducing low-end phones such as the Asha might be good for Nokia, it is also a little late for the company. With almost $1.2 billion in losses in the first quarter this year, Nokia needs to speed things up before it runs out of financial resources. Hopefully, China would be a catalyst to Nokia's success now that Microsoft Windows-based smartphones are selling briskly in the region. I'll be keeping an eye on Nokia's progress, and you should too, by adding it to your free watchlist.
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At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Microsoft. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Microsoft and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. 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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