Nokia shies away from mobile price war

Nearly every handset maker except Nokia--the world's No 1 manufacturer, selling one out of every three cell phones on the planet--has slashed prices on their phones. The lower prices have helped some of Nokia's competitors gain market share as they try to clear backlogged inventories and find a way out of the handset sales slump that has plagued much of the communications industry this year.

Motorola, the No 2 mobile phone maker worldwide, is one of the most noted cost cutters. The tactic has worked for the struggling company, according to industry analyst firm Gartner. Motorola's share of the handset market increased in the first quarter and is expected to increase again in the second quarter when new figures are announced next week, according to Gartner.

But despite the apparent success, Nokia won't join in the price cutting. Nokia chief executive Jorma Ollila told a group of analysts Thursday that the average price of the company's handsets will stay at current levels.

"I don't see that any of our competitors have a significant advantage," Ollila said during a conference call. "Price cutting and selling at a loss, as many of these competitors are doing...cannot continue for too long."

The price cutting mostly involves the older phone models because handset makers are getting ready to sell new products later this year, when the next generation of high-speed phone networks are switched on in some areas, said Gartner analyst Bryan Prohm.

Nokia's decision to keep prices as they are makes sense, as long as "Nokia's market share stays within their target range of 35 to 40 percent globally," Prohm said. The company's market share currently hovers near 40 percent.

Ollila addressed analysts after Nokia's report on its second-quarter earnings. The company reported profits on the high end of Wall Street expectations but painted a cloudy portrait for the rest of the year.

Revenue for the quarter, generated mostly by the sales of cell phones, grew 5 percent from the previous quarter. That same percentage growth should be repeated in the next three months and should start gaining steam by the end of the year, Ollila said.