Nokia cuts handset prices

The former maker of rubber boots, Nokia is slashing its prices in a bid to stop the rot of its high end market smart-phones.

A deep throat told Reuters that the steepest cuts of around 15 percent were made on prices for the company’s flagship model, the N8, the multimedia phone C7, as well as the business user-targeted E6.

Other price cuts will be smaller, but across the board and seems to indicate that Nokia thinks its pricing is out of wack.

Analyst Carolina Milanesi from Gartner said the price cuts were not too surprising as Nokia has indicated that it would be more aggressive on pricing to keep users from defecting.

She thinks that they will be discounting older products including the N8, the C7 and the C6, and ship the new ones at a very aggressive price too.

However, there might be a little more to it than that. Nokia has plans afoot with its big move to Microsoft and Windows Phone 7. That move has now become so significant to both companies that there were rumours that Vole was actually going to buy the mobile phone division, something that was hotly denied.

However, Nokia has to work out what to do until that date. It has shedloads of phones that it has to flog and if it does not get them into someone else’s pockets it is going to lose a huge chunk of market share.

It seems that the plan is to dump everything that is not a plastic product and push for market share. Nokia’s latest strategy is to push itself solely as a product company. Hardware is generally well received, and it managed to drum up interest with the stylish MeeGo phone it showed off in Singapore. 

If Nokia has a large base of punters who buy its phones then chances are they will seamlessly become happy Volish customers. Particularly in so-called emerging markets where it does have a growing userbase.

However, in the high end space, it is losing its customers faster than a Greek government burns through EU cash.

It is not a good idea to try and sell a new product to new punters. It’s better to try flog a new product to one which has been with you for years – and has not had the chance to sample other forbidden fruits.

The other advantage of a price cut is that it means that it can dump a larger chunk of phones in developing countries and strengthen its base there in time for the newer, presumably more sexy Windows phones.

Shareholders don’t like the idea. When news of the cuts leaked, Nokia shares fell a bit. The reason is that in the short term profits will fall and there is no guarantee that it will work either. A ten percent price cut is not really that much to prop up your flagging fortunes.