Nokia Makes a Cut, and It's Not Jobs This Time


Most of Nokia's (NYS: NOK) cuts recently have been to its workforce, with the last round being the deepest. The struggling Finnish phone maker has just announced a new cut, but this time it's the price of its flagship device, the Lumia 900. The device's on-contract price has now been slashed in half from $99 to $50.

That was quick.

The handset was launched just three months ago on Easter Sunday as AT&T's (NYS: T) new exclusive device running Microsoft (NAS: MSFT) Windows Phone 7. Nokia spokesman Doug Dawson told The Wall Street Journal, "This move is a normal strategy that is put in place during the life cycle of most phones." That may be true, but what does the speed of the cut say about the length of the Lumia 900's "life cycle"?

Dawson was quick to point out that Samsung's Galaxy S II also saw a $50 price drop after approximately the same amount of time. Although that device started out at $200 on contract, so the price cut amounts to a 25% reduction as opposed to a 50% one.

Nokia and Samsung also may have had to cut prices for different reasons. The Galaxy S II launch put it head-to-head with Apple's (NAS: AAPL) iPhone 4S launch, which took place during the same month. Trying to tackle the iPhone directly is always a tall order to fill, especially in hindsight as Apple sold a monstrous 37 million iPhones during that quarter -- the current all-time record high.

Microsoft's announcement that existing devices, including the flagship Nokia 900, won't be upgradeable to the next major version, Windows Phone 8, is also undoubtedly putting a damper on sales. There's also no backwards compatibility with new apps. Mobile consumers are well attuned to the fact that buying a smartphone nowadays includes the ecosystem platform, and breaking the continuity of the Windows Phone platform is bound to hurt sales, and Nokia definitely doesn't want to eat its inventory.

For Microkia, Windows Phone 8 can't get here soon enough.

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