Why Nokia's Netbook Plan Makes No Sense

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Nokia (NYSE: NOK  ) has a new netbook, but it'll cost you 575 euro --  roughly $820. Who's smoking the smoked fish in Espoo?

The trouble with this plan isn't so much the price, but who Nokia expects to pay the bill. Cell-phone network carriers will distribute the Booklet 3G, which usually means purchase prices are lowered thanks to carrier subsidies.

We don't know which carriers, of course, but Europe and America's top names are the likeliest choices. Vodafone (NYSE: VOD  ) , France Telecom (NYSE: FTE  ) , Verizon (NYSE: VZ  ) , and Sprint Nextel (NYSE: S  ) all come to mind.

So does AT&T (NYSE: T  ) , yet I wonder if Ma Bell's network is too tapped to handle another smart device. The data deluge caused by Apple's (Nasdaq: AAPL  ) iPhone is causing enough trouble as is.

More than anything, the iPhone illustrates the problem with Nokia's plan. AT&T pays a fortune to subsidize iPhone sales, only to be forced to reinvest billions in profits to bolster its network infrastructure. If you're wondering whether AT&T will ever catch up to the data demand the iPhone creates, you aren't alone.

Growing a new crop of advanced devices won't help. Certainly not the Booklet 3G, which the AP says will include a small, insertable card designed to access high-speed carrier networks when the device is out of range of a Wi-Fi network.

What's more, this so-called netbook -- can anything costing more than $800 really be called a netbook? -- will include a built-in navigation chip that will apparently connect to Nokia's map software.

In short: This device is going to be one heck of a data consumer. Carriers are supposed to subsidize this, an aluminum-plated guarantee that they'll soon be forced to upgrade their networks? I'm not so sure they will. Not without some concessions, anyway.

Smart devices such as the iPhone and Booklet 3G are here to stay, and mobile data will flow more freely as a result. Carriers can't escape this truth. But no one should be surprised if they're reluctant to pay more to connect to the revolution when the price of doing so is already high. 

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Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Nokia at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is a connecter, not a separator.

Read/Post Comments (2) | Recommend This Article (5)

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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 September 03, 2009, at 4:58 PM, duagreen wrote:

    Why do you think the US is the target market? The rest of the world doesn't suffer from the network inadequacies that AT&T does in the US. And the USD:EURO FX is what makes the price seem high. 575 euros will easily be subsidized down below 200 in Europe. This Booklet 3G is much nicer in terms of form factor and performance than the cheaper Netbooks selling in the US. Compare apples to apples and stop being so US-centric. Nokia has 40% market share without caving into ridiculous US mobile market politics. With 1.1 billion Nokia devices currently in the marketplace, I think the masses have spoken.

  • Report this Comment On September 04, 2009, at 3:26 AM, McHeron wrote:

    To my understanding expanding portfolio is an extremely good sign for Nokia. As the key point in future (5-10years) will be volume of services consumed. I guess the price is for early adopters. Over time the street price will find the competive level.

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