Bloomberg News

Nokia Shares Decline as Flagship U.S. Handset Price Drops

July 16, 2012

Nokia Declines as Flagship U.S. Handset Price Drops to $49.90

Nokia Oyj's Lumia 900 is now available for $49.99 with a two-year commitment, according to AT&T’s website. Photographer: Daniel Acker/Bloomberg

The price of Nokia Oyj (NOK1V)’s Lumia 900, the smartphone the company is counting on to revive U.S. sales, was cut in half at AT&T Inc. (T:US) stores in a sign the device is struggling to lure users away from the iPhone and Android models.

Nokia fell as much as 3.9 percent in Helsinki. The phone is now available for $49.99 with a two-year contract, according to AT&T’s website. The largest U.S. phone company began offering the device in April. The latest versions of Apple Inc. (AAPL:US)’s iPhone and Samsung Electronics Co.’s Galaxy S, which runs on Google Inc. (GOOG:US)’s Android software, start at $199.99 at AT&T.

Chief Executive Officer Stephen Elop has placed Nokia’s bets on the Lumia series, which uses Microsoft Corp. (MSFT:US)’s Windows Phone operating system, to stem declines in revenue and market share. Lumia sales have been disappointing and the current versions risk becoming less attractive because they can’t be upgraded to run the Windows Phone 8 software due out later this year, said Michael Schroeder, a FIM Bank analyst in Helsinki.

“Nokia cutting the price on the Lumia probably has to do with the phone not being compatible with the next version of the Windows Phone operating system and it needing to clear out its inventory,” Schroeder said in a phone interview. “Nobody will want to buy the current version once the new operating system is out.”

Nokia declined as much as 5.9 cents to 1.45 euros and traded at 1.48 euros at 1:04 p.m. Helsinki time. Falling revenue and mounting losses have left the company’s stock near its lowest level since 1996.

‘Accessible Price’

Nokia, scheduled to report results for the second quarter on July 19, said last month that adjusted operating margin at its devices unit would be worse than a loss equivalent to 3 percent of revenue in the first quarter. Lumia shipments will probably drop below 3 million units in the third quarter from the second quarter’s 3.3 million, Schroeder projects.

The price reduction at AT&T reflects standard practice in the industry, said Doug Dawson, a spokesman for Nokia. The subsidized price consumers pay when agreeing to a contract with a carrier doesn’t necessarily reflect the actual cost of the phone, he said in an e-mail.

“I realize we’re under a microscope at the moment and everything we do is under closer scrutiny, but this move is a normal strategy that is put in place during the lifecycle of most phones, and allows a broader consumer base to buy this flagship device at a more accessible price,” Dawson said.

North America was the only region where Nokia’s handset shipments grew sequentially in the first quarter, helped by the release of the Lumia 710 on T-Mobile USA. Still, the 600,000 units shipped marked a 50 percent decline from a year earlier.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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