Just when you thought talk of Nokia's (NYSE:NOK) slipping market share was yesterday's news, the chatter's back. Today, shares of the Finnish handset maker sagged when data from Strategy Analytics backed up the idea that Nokia's losing market share. Reports are also circulating that it's instituting price cuts on its low-end models to reverse the trend.
The data implied that Nokia lost ground to Samsung and Motorola (NYSE:MOT) in the January-March time frame, slipping to a 29.2% share from 34.9% at this time last year. Last week, there was proof of that concept when Motorola reported earnings that blew past forecasts, as it quickly moved to fill market niches in handsets that Nokia had neglected.
On the other hand, right here at the Fool, we've heard the compelling argument that perhaps this is a temporary moment of weakness and that Nokia may return, judging by its sisu, or "pride and fortitude in the face of adversity."
However, I recently went to Radio Shack (NYSE:RSH) to upgrade my Sprint PCS (NYSE:PCS) handset. When I asked the friendly sales guy which models he preferred, he said he'd heard the cheapest handset on the lineup -- you guessed it, the Nokia -- "kind of stinks."
The bargain-priced Nokia certainly didn't include the bells and whistles many people now expect from new cell phones; it wasn't a clamshell flip top and it lacked a camera. In fact, it resembled the cell phone models most of us upgraded from years ago. (Remember those? They had a bad tendency to dial from pants pockets or handbags if the key lock wasn't on.) Cell newbies might go for it, but at this point, those are fairly few and far between.
Now, it's time for the grain of salt. Although the sales guy's probably front line to customer complaints, I doubt there's no conflict of interest in suggesting the least expensive handset. However, when I first wrote about Nokia's shortfall, I received reader feedback claiming poor quality of Nokia handsets. Maybe Nokia handsets have been striking consumers as, well, cheap... as in, low quality.
Regardless, the argument remains that Nokia's a good company that took a strategic wrong turn. If there is indeed a quality issue, though, Nokia may have a more difficult time regaining lost market share. While the chance for reward seems great considering the stock's plunge over the last month, there's still risk in this recent stumble.
What do you think? Is the market's reaction to Nokia's tough times an overreaction? Talk to other Fools on the Nokia discussion board.
Alyce Lomax does not own shares of any of the companies mentioned.
