Nokia Drops Phone Prices, Puts The Squeeze On Competitors - InformationWeek

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Commentary
7/31/2008
10:35 AM
Eric Ogren
Eric Ogren
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Nokia Drops Phone Prices, Puts The Squeeze On Competitors

Nokia has an empowering, vice-like grip on 40% of the world market for mobile phones. Even with its market-leading position, it is stepping up the pressure on its rivals, and recently cut the cost of many of its phones by about 10%. Is this the first sign of a price war?

Nokia has an empowering, vice-like grip on 40% of the world market for mobile phones. Even with its market-leading position, it is stepping up the pressure on its rivals, and recently cut the cost of many of its phones by about 10%. Is this the first sign of a price war?Quarterly reports for the mobile phone manufacturers have been rolling in over the last couple of weeks. Nokia's were as strong as ever. The Finnish company has maintained a stranglehold on 40% of the market for all of 2008 so far. That has to be a good feeling.

Samsung and LG have fared pretty well, though Sony Ericsson took a beating recently. Motorola, surprisingly, managed to turn a small profit for the quarter. With demand for devices slowing, manufacturers need every dollar that comes in the door. That means now is not the time for a price war, which will hurt margins.

Nokia doesn't seem concerned about its margins, though, and, according to Reuters, has slashed the price of many of its models by an average fo 10%. Some of the models seeing price drops are the 5310, 5610 and N81, all of which are multimedia, music-focused phones that compete head-to-head with Sony Ericsson's Walkman lineup.

Of course, Nokia officially declined to comment on any change in its pricing policies. I will say this, however: Nokia phones are expensive as heck, so price cuts are welcome. The E71, for example, which just went on sale here in the U.S., costs about $500 unlocked. The N95 cost $750 when it was first released, and, nearly 18 months later, still commands more than $550 at retail.

Whether or not this is an attempt by Nokia to maintain sales volumes in a turbulent market or just a simple price drop, it could spur others to follow suit. A price war is something that might be good for consumers right now, but it could be devastating to the phone manufacturers.

We'll have to keep a watchful to see if Nokia's competitors respond.

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