Nokia's Lumia 900 Can't Stack Up Against the iPhone

Nokia's (NYSE: NOK  ) fancy new Lumia 900 may be the Finnish giant's new belle of the ball, but it also costs a pretty penny. The flagship Microsoft (Nasdaq: MSFT  ) Windows Phone device is getting a lot of backing from carrier partner AT&T (NYSE: T  ) , which is gunning up its marketing engines into high gear to push its new exclusive smartphone.

Although if you were to compare the component costs next to Apple's (Nasdaq: AAPL  ) latest iPhone 4S, it doesn't paint a very pretty margin picture for Nokia. Apple's device sells for more and costs less, spelling out juicier margins for Cupertino. Here's how the iSuppli bill of material estimates for some of the more relevant (and expensive) components stacks up:

Component

Nokia Lumia 900

Apple iPhone 4S

Display and touchscreen $58 $37
Processor $17 $15
Memory $27 $28
Wireless chips $38 $24
Cameras $18 $18
Power management $9 $7
Mechanical and electro-mechanical $18 $33
Total component cost $209 $190
Unsubsidized retail price $450 $649
Gross margin ($) $241 $459
Gross margin (%) 53.5% 70.7%

Source: iSuppli.

That's a pretty major margin advantage for Apple to enjoy on its newest iteration of the iPhone, which also helps explain why Nokia's overall gross margin of 27.7% last quarter hardly compares with the 47.4% gross margin that the iPhone maker enjoyed last quarter.

On the cost side, there are a couple of notable differences worth mentioning on why the Lumia 900 racks up more component costs than the iPhone.

The display and touchscreen combination costs much more on the Lumia 900, but there are two big differences. The Lumia 900 features a notably larger 4.3-inch display, compared with the 3.5-inch iPhone Retina Display. The Lumia 900's display is also an AMOLED display from Samsung, which are pricier to manufacture.

Both devices use wireless chips from Qualcomm (Nasdaq: QCOM  ) , but the Lumia 900 uses one with 4G LTE capabilities, while the iPhone will likely see 4G LTE data speeds later this year served up by Qualcomm's newest 28-nanometer baseband chips. For now, the current iPhone's 3G speeds are slower than the Lumia 900's data connection.

These cost estimates exclude things like manufacturing, marketing, distribution, or software R&D. Of course, Apple spends very little on R&D in percentage terms relative to its revenue, and Microsoft is the one pitching in the Windows Phone operating system on the Lumia 900.

Nokia's fate looks dimmer each quarter, with its first quarter smartphone market share getting slashed by nearly two-thirds and falling into single-digit territory as Samsung and Apple take over. Its margins aren't helping much, either.

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Fool contributor Evan Niu owns shares of AT&T and Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Qualcomm, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft and Apple and creating a bull call spread position in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (16) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 04, 2012, at 10:17 PM, techy46 wrote:

    So instead of saying "The Nokia Lumia 900 can't stack up against the iPhone" like an Apple fan why don't you say "The Apple iPhone is overpriced compared to the faster Nokia Lumia 900". Oh, I forgot you're the foolos that've been saying the PC's Dead instead of the PC's Mobile.

  • Report this Comment On June 04, 2012, at 10:33 PM, ramaus wrote:

    These costs are guesses and Apple pays royalties to Nokia.

    "-but the Lumia 900 uses one with 4G LTE capabilities, while the iPhone will likely see 4G LTE data speeds later this year served up by Qualcomm's newest 28-nanometer baseband chips. For now, the current iPhone's 3G speeds are slower than the Lumia 900's data connection."

    You sound desperate Evan. Are your kids getting hungary?

  • Report this Comment On June 04, 2012, at 10:48 PM, ajaykc wrote:

    Shall I throw up after reading this sick article? I have yet to read a balanced article from an apple fanboy.

    The article should be corrected to "Nokia Lumia 900 offers a better value than future iPhone yet to provide" than misleading people either for investment purposes or as a consumer.

    Apple's R&D cost is super low because it does not have R&D, rather it has reverse engineering lab that breaks apart parts from its competitors and starts from there.

  • Report this Comment On June 04, 2012, at 10:57 PM, Jobe01 wrote:

    Is this guy on crack? He says the Lumia can't stack up against the Iphone because they charge $200 less to customers? Wow, what an idiot.

    Then he talks about how the 'new' Iphone speed in the upcoming Iphone version 'may' be faster? He shoots himself in the foot several times by pointing out the Lumia's superiority.

    The current Lumia version is faster, has a bigger screen, and costs more the $200 less.

    They don't call these people fools for nothing.

    Jobe

  • Report this Comment On June 04, 2012, at 11:16 PM, zaxbowow wrote:

    Fanboy journalism 101:

    Nokia sells a superior phone for less money.

    How to sell the story:

    A) Nokia can't complete.

    B) iPhone users are sheep.

    C) Steve Jobs is God.

    D) A and C

    The correct answer is D

  • Report this Comment On June 04, 2012, at 11:24 PM, bbrriilliiaanntt wrote:

    Nokia? Nokia is FINNISH-ED! Belongs with the rest of these 'waste of my time' bitter comments...

  • Report this Comment On June 04, 2012, at 11:57 PM, Larry2012 wrote:

    Have to say GREAT comments here. I purchased a Lumia 900 and can say it is a great phone.

    Glad to see that Apple is the one with the HUGE profit margins and not even ATT on this one.

    Phone is superior in so many ways.

    This coming from Android and not even the forbidden apple.

  • Report this Comment On June 05, 2012, at 12:06 AM, yonkmember wrote:

    Guys, I am long MSFT. Evan makes a good point though. As an investor, margins matter! Apple is an amazing story in this regard. So although I am long MSFT, the discussion about margins IS relevant. It is not saying the MSFT/Nokia combo won't work. However, given a product I want a higher margins (DUH). This alliance is paying now for the hope of future market share. Lay off Evan, his articles are as unbiased as the tech world allows ;).

  • Report this Comment On June 05, 2012, at 1:38 AM, leofish1 wrote:

    What a misleading BS headline!

    It does not stack up because it has thinner margins and offers better value to consumers using expensive components??? WTF

    They are giving an amazing phone away to build an install base by offering at a great price point.

    Now, my name is not Albert Einstein but Evan you are no Albert Einstein.

    You should change your headline as it does not match the contents of your article and you miss the point.

  • Report this Comment On June 05, 2012, at 2:38 AM, mistacy wrote:

    Nokia & ATT's moves make perfect commercial sense. Late in the smart phone game, Nokia has to enter with a BANG. What else can you do to outdo your competition than sell a better product at a lower price? Given that "better" is slightly subjective, from a performance stand point the Lumia wins for now against the iPhone. & that's all it takes to create a momentum to build a great customer following. I am a pro Apple computer fan. However, I yet have to like an iPhone. I checked out the Lumia about a week ago, & was actually impresssed. That you like Nokia or Apple, it doesn't matter. Look at the reviews & the buzz about the Lumia 900. Right now, it is the new hotcake of smart phones. Nokia could be rejuvenated through this phone alone. Microsoft backing it up is a positive thing too. I don't think Nokia is going anywhere but up in share price within the end of the year. Look for outperforming the year target price by November.

  • Report this Comment On June 05, 2012, at 9:27 AM, radarthreat wrote:

    This "article' is a thinly-veiled advertisement for a premium MF service, like so many other MF articles. Shame on you, Motley Fool. You've become everything you once railed against.

  • Report this Comment On June 05, 2012, at 10:05 AM, sandysanmina wrote:

    Is that the same Lumia that has already surpassed the Iphone in China sales?

  • Report this Comment On June 05, 2012, at 12:34 PM, Bozly999 wrote:

    Very misleading title. Thanks for wasting my time.

  • Report this Comment On June 05, 2012, at 10:09 PM, alexbigkid wrote:

    Zero credibility for numbers.

    1. Why is the dual core processor of iPhone 4s cost less then Nokia's single core processor?

    2. iPhone 4s camera is a BSI camera, which is more expensive technology. So why both are $18?

    3. If you are comparing the iPhone 4s 16GB to Nokia 16GB, why memory on Nokia cost more?

    I still think that Nokia's HW is more expensive then iPhone's and they needed to lower the sale's price in order to get momentum, to increase market share.

    Once Nokia had a SW glitch they offered customers $100 for inconvinience whether they had a problem or not. Apple never admitted the HW antenna bug, saying customer holds the phone the wrong way.

    I think, once people realize they are getting ripped off by Apple, they will drop them like a hot potato.

  • Report this Comment On June 06, 2012, at 4:26 AM, ApplePureHype wrote:

    Nokia Lumia parts cost 10% more than ipony parts because:

    LUMIA is

    - faster

    - has more capabilities

    - has a gorgeaus AMOLED 4.3" display

    - is SLEEK and Beautiful

    Then, you can by it with 200 less than the ipony device !!!!

    Nokia LUMIA rules !!!

  • Report this Comment On June 06, 2012, at 4:27 PM, alexlax wrote:

    APPLE PAYS royalties to Nokia for its patents! You did not include this so you article is WRONG and misleading.

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