Nokia's Elop: Lumia price cuts will help us take on Android in retail war

Nokia's Elop: Lumia price cuts will help us take on Android in retail war

Summary: Consumers may like Nokia's Windows Phone flagship device but retailers need some extra persuasion to give it a push, according to the company's chief exec


Consumers do actually like Nokia's Windows Phone Lumia device, but retailers are proving harder nut to crack, according to Nokia chief exec Steven Elop - as he set the scene for a price war with Android.

For the relatively small number of consumers the Lumia has reached in its short existence, the phone has been "well received",  Elop told analysts on a conference call Thursday.

The troubled Finnish mobile device maker today announced it will lay off 10,000 workers worldwide and acquired elements of Swedish mobile imaging software company, Scalado, as part of a longer term effort to focus on the Lumia.

With "specific support from Microsoft" Nokia will aim to increase its appeal by pushing the price of the Lumia line below the entry level Lumia 610 as part of its "low end price point war" with Android.

The real challenge, Elop said, is convincing retailers to bring the device out of the shadows.

"How do you get a preferred position on a shelf, how do you make sure the lights on your device are brighter than the ones from down the road?" asked Elop.

While the aim is to get more Lumia devices into the hands of consumers, Nokia will in fact narrow its direct sales and marketing efforts to select markets, palming off less significant ones to distributors to be managed through a central hub.

The US, UK, China and "certain" Asian and European nations would remain in focus with more effort placed on carrier partnerships, said Elop.

"We’re deliberately going through a cycle of concentrating on some markets at the expense of others."

Nokia's chief financial officer Timo Ihamuotila would not give a timeline for the Lumia to exceed its current market share of roughly 1.5 percent, but said Nokia hoped in the longer term to increase that to 10 percent.

While mapping and navigation have become commoditised, Elop said,  Nokia's location-based services would give it an edge over rivals, pointing to Nokia City Lens, its augmented reality application, and its public transport mapping system.

Elop blamed Nokia's inability to differentiate the Nokia experience on Windows Phone to date on its late entry on the platform but added that Windows Phone 8 (Apollo) and Windows 8, both expected to be released by the end of summer or thereabouts, will be "key milestones" for Nokia.

Topic: Nokia

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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  • Good luck...

    ... with the prepaid phone strategy.
    • Prepaid

      From what I understand, in a number of markets, prepaid is the way consumers go. They'd have to have a really good reason to ignore that.
      • Correct ...

        ... they'll go to Walmart, and what's there already with the lights on them?
  • Uh Oh, Part II

    Nokia doesn't need to sell oodles of phones priced lower than the competition. They need to sell oodles of phones at the same or better price than the competition.

    The other inference I draw is that licensing cost for the os - whether temporary discount or renegotiation - is their only recourse for lowering costs. That's not good.

    Microsoft, too, would rather oodles of phones were sold with the OEM paying full fare on the license. Meanwhile, non-Nokia OEMs may be miffed at Microsoft for giving Nokia the special deal and increasing Nokia's units sold by reducing OEM units sold.

    These are signs of a commoditized segment in stasis or contraction.
  • Good luck indeed

    I wonder if Nokia's shareholders are asking themselves,"hmmnn... maybe we shouda pee'd our pants to keep warm. After all Samsungs pants must be hot as the sun thanks to those 9 million plus pre-orders of that little OS our CEO Elop said was just going to be a commodity. Heck even our partners Microsoft is making half-billion bucks on licensing fees alone"
  • Microsoft charges Tablet OEMs a whopping $85 for Windows RT.

    [b][i]"When Microsoft announced its tablet strategy with the Windows RT, many thought that Microsoft will change its pricing model for OEMs too, signaling a shift in strategy. Reality is however, vastly different with Microsoft requesting as much money as OEM version of the Windows 7 Home Premium."[/i][/b]

    Android is free.
  • It's like seppuku, but with phones

    [ul][i]its ???low end price point war??? with Android[/i][/ul]Elop is entering Nokia in a bleeding contest against Samsung. Has he seen how much blood Samsung can afford to lose before they even get tired? Price wars are for when you're the Big Guy and you can outlast the Little Guy at taking losses. They're not for when you're losing money, bleeding cash, and laying people off.
    Robert Hahn
  • Elop is Delusionaly Desperate, no?

    I guess he has to promote an optimistic message to prepare for the highest amt. of his golden parachute likely coming soon.
  • Elop is completely delusional...

    The Lumia has like a 1-2% market share by most estimates. Based on that, it seems like most buyers are WP enthusiasts - Of course consumer reviews are going to be good! What is a retailers motivation to not push a device? A retailer will push any device that they think will sell (& not be returned). So if retailers don't believe you're a fit for their consumers, odds are that they're right.
    • Pushing on a string

      One of the ten warning signs of impending doom is when you see a company that ought to be able to execute a "pull" strategy (i.e., pull product through the channel with high advertising expenditures) suddenly shift to a "push" strategy of trying to get retailers to steer customers your way by offering them higher margins. That's the bean-counters turning a fixed cost (like, say, a hundred million dollar media buy) into a per-unit charge. They do that to limit exposure... If it doesn't work, you're not out a hundred million, just the subsidy on the units sold. It is well known that a properly-executed pull strategy will not only sell more goods than a push campaign, it will increase your power over resellers because you own the end users, not them. So Nokia would only do this if (a) they have little confidence that a big ad campaign would be effective, or (b) committing to spend Big Bucks on a media buy exposes the company to serious financial risk due to cash flow issues.

      Problems arise if this doesn't work, because then a pull strategy will be out of reach. The Board will ask, rightly, "if the retailers can't sell them when you give out spiffs, why will customers suddenly buy them when you spend $100 million?" So this is a last-ditch effort by Elop. It either works or he's hosed. And sadly, Nokia with him.
      Robert Hahn
  • For Nokia's sake, I hope they can take this out of Elop in blood and money

    Perhaps he could be sued into penury, cast into jail and forced to watch Ballmer and Jobs biographies for the rest of his natural.
  • Awesome WP8/Apollo on its way.

    The awesome WP8/Apollo is on its way. Yay. Ooops now WP7 sales tanking, consumers waiting for new and better. Because, oops, WP7hardware cannot be upgraded to WP8. So until WP8 debuts, Nokia in a holding pattern. As in bleeding cash for 3mo or 6 mo. Sinking ship, taking on water.
  • All those nasty evil retailers!

    they don't want to sell Elop's fantastic phone! Well, I suddenly feel like in kindergarten - since reality is ugly, kids will just play deeply hurt and 'won't talk to it again', because it's all they can do. I'd think that CEOs climbed a bit higher with personal development, so - Mr. Elop - maybe- just maybe- there is a REASON the retailers don't want your phone? Or do you seriously think they are all irrational?
    I would not be as bold as to say that the reason might be you, because it would imply the change is impossible, and after all you're perfect, n'est-ce pas? But maybe there is something you have(n't) done?