1 Reason Nokia's Fate Isn't Completely Sealed

It's no secret that Nokia (NYSE: NOK  ) isn't in the best position to dominate the smartphone industry any time soon, but that doesn't mean some of the company's recent moves aren't promising. Nokia's strengths are in its low-cost phones for emerging markets, which just might keep the company afloat.

How low can you go?
This week Nokia introduced four new phones at the Mobile World Congress, and three of them are available for less than $200. Nokia's new Lumia 520 is currently the company's lowest-priced smartphone at $180, but earlier this week The Wall Street Journal reported CEO Stephen Elop hinted at the conference that an even cheaper Windows Phone could debut later this year. If Nokia were to pursue that idea, it may be one of the best decisions it's ever made.

Last year, executives from mobile carriers in developing countries asked the GSM Association, a collection of mobile operators worldwide, to pursue a smartphone in the $50 price range for emerging markets. These areas need capable phones that don't come in at the high price points -- and Nokia may be the best company to bring it to them. Right now, Android devices lead the way in low-cost smartphones. That's one of the reasons why Android dominates the global smartphone market share with about 68%, and Apple's premium iPhone has about 19%.

Nokia's $180 Lumia 520 isn't expensive, but it's not as cheap as some emerging markets consumers need in order for them to upgrade to a smartphone. Nokia has always offered low-cost feature phones for consumers, and now it has two new phones that could help bridge that gap. The Nokia 301 will sell for about $85 and features a 3G connection and built-in apps like Facebook and Twitter. The company also introduced the Nokia 105 that the company said is for several billion people in the world who don't have mobile phone.

Nokia is using these phones to meet emerging markets where they're at, while providing new features like social media that they may haven't had in the past. Growing mobile markets like India have a lot of potential for companies like Nokia, and with competitors like Apple and BlackBerry only claiming about 5% of India's smartphone market share, Nokia has room to introduce smartphone-like phones like the 301 and even a cheaper version of its Lumia line.

Right phone, right price
Smartphones are the obvious future for mobile communication  but there's still a huge demographic that can't afford one and needs a cheaper option. If Nokia can sell its low-end phones to those consumers, and possibly launch a smartphone priced less than its $180 Lumia 520, the company may tap into a market that companies like Apple have yet to enter.

With all the low-priced Android devices on the market, it's going to be hard for Nokia to elbow its way into some markets, though. But Nokia knows how to sell cheap phones, and it already has massive brand recognition in many emerging markets. Investors need to see the company build on markets that aren't yet loyal to Android-based phones. Nokia has the most potential for growth in markets where consumers don't yet have a smartphone, but can afford a cheaper Nokia version.

Nokia is fighting for smartphone relevance and the company has bet its future on the Windows Phone OS. If Nokia creates a cheaper version of Lumia Phone running the Windows OS, it could open up vast new markets for its smartphone line. But the company has an uphill battle as it fights in markets dominated by Apple and Android. To help investors determine the opportunities and risks facing Nokia, Motley Fool analyst Charly Travers has created a new premium report on the company. To get started, simply click here now.


Read/Post Comments (5) | Recommend This Article (3)

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  • Report this Comment On February 28, 2013, at 11:11 PM, jeffreber44 wrote:

    Very well put together article. It makes the point that many don't realize. The fact that nokia can emerge as the dominate supplier of phones to a demographic that can't afford a full fledged smartphone is key to gain the market share Nokia needs. They are well on their way to succeed.

  • Report this Comment On February 28, 2013, at 11:22 PM, marv08 wrote:

    Last quarter Nokia managed a small profit, solely based on the networking and mapping businesses.

    Now, adding even cheaper phones will save them? I am not seeing what market share adds to the bottom line. Eliminating the devices business would lift their operating margin tenfold.

    Between Samsung, with a marketing budget exceeding Nokia's market cap, and government sponsored Chinese entrants... what are their chances when going for "cheap"? Not convinced.

  • Report this Comment On February 28, 2013, at 11:42 PM, VRSEFgold wrote:

    I like NOK @ 3.50 , but I say VRSEF will go from .50 to 5.00 this year.

  • Report this Comment On March 01, 2013, at 9:54 AM, Rockymarchino wrote:

    NOTE!

    Lumia’s popularity pushes Windows Phone market share in Poland to 16.3% !!!

    Lumia 620 in all colors and Black Lumia 920 sold out again in Germany!!!

    Facebook MAU statistics shows remarkabe bigger growth in WP user numbers in Q1 2013 as compared to Q4 2012!!!

    Nokia can lay it claim to about 80% of these 9.77 million new users, which translates to about 8 million Lumia sales. So, Q1 2013 may be much stronger than Q4 2012 for Nokia in terms of Lumia numbers !!

    Business is going fine! Do not wait until Q1 report.

    B*U*Y

    Have a nice weekend!

  • Report this Comment On March 02, 2013, at 7:53 PM, normcf wrote:

    Nokia may bring out lower priced phones, but time will not stand still while they do it. In the mean time, lower priced androids will come. As well, other free OS will be released. Eventually, as the hardware gets cheaper, the difference in phone prices will be mostly OS cost (WP8 or Android licensing fees to microsoft). In many countries, these differences will be significant, especially where the growth will be. Nokia non-windows phones can be price competitive as will tizen, ubuntu, etc. but the profit per device will be small.

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