Nokia's Lumia bind: Volume, pricing equals downward spiral

Nokia's Lumia 900 is headed for the bargain bin. Good luck positioning the next-gen device as a premium model.
Written by Larry Dignan, Contributor

Nokia's high-end Lumia 900 device is going to go for $49.99, but it's unlikely the company can move enough volume to pull out of its current conundrum.

The mobile device maker reports its second quarter results on Thursday and analysts are expecting a complete debacle. Analysts are expecting a loss of euro 340 million on revenue of euro 7.53 billion.

How bad is it? Nokia already ditched its outlook going forward. In addition, Nokia launched a high-end device at $99 in the U.S. with a two-year contract at AT&T and that price will fall. To make things even worse, the Lumia 900 is orphaned because Microsoft is launching Windows Phone 8 without backward compatibility. In a vast understatement, the Wall Street Journal noted that Lumia sales are under intense scrutiny.

Related: Nokia: Cash and clock could run out on comeback | Nokia to cut 10,000 jobs by 2013 |  CNET: Lumia 900 still a raw deal despite heavy discount

Nokia and RIM have different names, but the story is still the same. Both companies have to sell very flawed devices as they await new models to move.


CNET's Roger Cheng sums it up:

The lack of an upgrade option is going to burn a lot of goodwill Nokia spent millions of dollars building up over the last few months. Nokia's "smartphone beta test" campaign, presumably now includes its own current line of Lumia phones.

Michael Schröder, an analyst at research firm FIM, said that Lumia sales are "likely to get hammered in Q3." He said:

Lumia volumes have so far been disappointing and the company is now facing additional challenges as Microsoft is preparing an autumn launch for its new Windows Phone 8 platform, lacking backward compatibility with current WP hardware. We expect operators to be very reluctant to promote the current generation of Lumia devices to their customers, as the devices will become outdated in just a couple of months’ time. Latest revenue data from Nokia’s OMD partner Compal (-40% m/m in June) confirms a significant drop in Lumia orders at the time of Microsoft’s announcement. We forecast 3.3 million Lumia units shipped in Q2 (consensus median: 4 million) and expect deliveries to be down to below 3 million in Q3 (consensus 5 million) ahead of the WP8 launch within the next couple of months.

The bigger hit here may be the Lumia brand. Nokia priced the device low out of the gate in a way that didn't scream "premium." And now Lumia is headed to the bargain bin. When the next-gen Lumia lands it's unclear whether Nokia can position it as a premium device.

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