Telecom Lead Europe: In an attempt to improve its falling
smartphone market, Nokia has slashed the price of its flagship Lumia 900, which
is the sole LTE device in its stable.
Nokia has chopped the price of Lumia 900 by 50 percent to
$49.99.
The smartphone is now available under a two-year contract
from AT&T, which is the only carrier to offer Lumia 900 in the U.S. The
reduction, which comes only after three months of Lumia 900’s launch, is considered
by many analysts as an indication that the device is not performing well.
However, it is not clear how Nokia and AT&T will pay for the price
reduction.
Nokia has been losing market share to Apple’s iPhone and
an array of smartphones that run on Google’s Android operating system. In an
effort to improve its falling smartphone market share, the company ditched its
Symbian operating system and teamed up with Microsoft to develop Windows based
smartphones.
Though Lumia is a much improved offering from Nokia’s
desk, we remain skeptical about its success, as the company has lagged far
behind two of its closest peers in first quarter sales. Owing to
worse-than-expected financial results, management has opted for another 10,000
headcount reduction and plans to close down three facilities in order to lower
its operating cost. Additionally, for the first time in 14 years the company
has lost its ace position to Samsung Electronics and has been downgraded by all
the three major credit rating agencies.
We believe that the pressure of fierce competition from
rivals led Nokia Corp. to slash its Lumia 900 prices. Although this could
result in a mass market appeal for its flagship device but would eventually
affect its bottom line. Nokia Corp. is also lagging behind its rival in
application development count, which also needs to be improved in order to
survive in this competitive market condition. Last but not the least, OS
partner Microsoft Corp. has announced that Lumia 900 customers won’t be able to
upgrade its software to Windows phone 8, which could be a major setback for
Lumia 900’s success.
The current Zacks Consensus Estimate for Nokia
Corporation is pegged at a loss of 11 cents for the second quarter with a
growth rate estimate of (218.89 percent). For 2012 the Zacks Consensus
Estimates stands at a loss of 30 cents with growth rate of (178.95 percent)
while for 2013 it stands at 2 cents with a growth rate of 107.22 percent.
Zacks Team
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