Is Nokia Falling Asleep at the Wheel?
Analysts and investors alike aren't impressed with Nokia's (NYS: NOK) new flagship phone, the Lumia 920. Investors sold off Nokia shares by 15% following the announcement, expressing their disappointment with the device's competitive prospects.
The handset is Nokia's first for Microsoft's (NAS: MSFT) new Windows Phone 8 platform, transitioning from Windows Phone 7 earlier this year to a new operating system that shares a foundation with Windows 8. The Lumia 920 will need to compete aggressively with both Apple's (NAS: AAPL) new iPhone 5 as well as leading Google (NAS: GOOG) Android devices like Samsung's popular Galaxy S3.
However, Nokia has decided not to be particularly aggressive on one front: pricing. In fact, the Lumia 920 is priced at a premium relative to the Galaxy S3 in many parts of Europe when it launches in November. Reuters reports that many analysts are skeptical of the Finnish giant's decision to ask so much and that the device's sales may suffer for it. Ovum analyst Nick Dillon thinks the premium will be a tough sell to consumers.
With Android and iOS being the dominant mobile platforms today, consumers need some incentive to take a risk on the less-developed Windows Phone ecosystem. You'd think that Nokia would price lower to provide such an incentive to buyers that are on the fence about Windows Phone, especially as it has less than a 3% global market share and less of an app selection. Instead, the Lumia 920 will cost up to 25% more than the Galaxy S3 (before contract subsidies).
Thanks to Microsoft's strict control over its software, Windows Phone will inherently be more of a commoditized platform than Android, where OEMs are able to add more custom software modifications as a point of differentiation. Even HTC's new Windows Phone 8X flagship looks nearly identical to the Lumia 920.
In general, the more commoditized a market is, the less pricing power that companies have. That's Econ 101 right there for you. Maybe Nokia missed that class, though, and opted for Falling Asleep at the Wheel 302.
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The article Is Nokia Falling Asleep at the Wheel? originally appeared on Fool.com.Evan Niu, CFA, owns shares of Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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