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Nokia Corporation Message Board

  • groovenirvana2013 groovenirvana2013 Feb 25, 2013 3:03 AM Flag

    This Is No Way To Run a Business

    Very disappointing news from the MWC. No tablet. Nothing new or innovative. Cheaper phones and dropping prices on the flagship phone. How does Elop plan to turn a profit for the company if he is just giving the phones away? Think about it. If the ASP for the 520 is under $200, then the margins will be razor thin. And dropping the ASP of the existing models will only cut margins even further. So what was the point of 620 (your lowest priced smartphone) if you're then going release an even cheaper smartphone a month later?

    As I type this, I typing it on a Macbook Air in an Apple store in Gingham in Seoul, South Korea. Even here in the heart of Samsung country, AAPL does well. There are iPhones and iPads on the streets and in the subways. There are MacBooks and iPods. They do the Gangnam Style here on iPhones as well as Galaxy S III's.

    Why is that? Why doesn't AAPL just gut their business model and start giving their phones away like Nokia? Because there is no $$$ in that! The brand loses value and customers don't feel like the product is worth paying for. It's counterintuitive but true in the world of business. People want to pay for quality. Yes. They want a company to take their money if they feel they are getting something of quality. Hate AAPL all you want but they do produce quality products even though one has to pay a premium.

    It's the difference between a luxury car and a station wagon. Nokia is in the station wagon business. AAPL makes luxury cars.

    I can't predict the future. You may all be right about Nokia going up in price in the next 12 months.

    But I can guarantee one thing: There is absolutely no way Nokia will be able to make a profit if they keep cutting the prices of their smartphones to the point their is no margin at all. Feature phones from Nokia will run at 70 Euros and the 520 will run at only twice that. #$%$? What's the point of selling the smart phones if they are almost the same price as the feature phones. It makes no sense to commoditize your product and brand in that way. Just not a way to run a business if you want to make money.

    Really curious to see how this story plays out over the next few years. Will the smart phone industry be commoditized to death by companies like Nokia? Or will smart phones remain a prestige product people are willing to pay more for?

    We'll have to wait and see. But this news from Nokia is terrible from a profits standpoint. They can sell 200 billion phones and never turn a dime on any of them if they keep gutting their prices that way. Not good for Nokia. Not good for the industry. Not even good for the consumer.

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