If you continue to cut prices on the products you sell, eventually you won't make any money selling them. Business 101.
Groover, I think that what escapes you is the concept of value.
Excessive margins have the problem of inviting competition. Which is what has happened.
Nokia has read the bill board and has turned the corner. They know what to do and they are doing it.
Making things that people want and selling at a price that is competitive/ reasonable.
The kicker is that the pundits had pushed NOK well below its real and or intrinsic value.
The pure notion that it will not disappear is enough for a double from here.
The question remains. Will they perform or fall flat in their faces. It is in their hands.
For Samsung, they have an intrinsic problem with China. They are not their first choice just like Japan.
As for manufacturing, which is Samsungs advantage, I think China can give a good run for their money/ position.
This is just part of their strategy, but it's critical: disruption at the low end. Their biggest short-term problem for earning power has been execution. The high-end phones are more than solid, but the ability to deliver at the level of demand has been very frustrating.
I love the low end strategy, especially since they are executing it around differentiation rather than pure price point commoditization. They offer significantly more value at the low end now. This is the defense. The offense is the high end and innovation.
Sentiment: Strong Buy
Could be. But it's going to be a long hard struggle convincing consumers that you are both a high end product and a low end product. Last time I checked Mercedes Benz doesn't manufacture Honda Civics. Again, read my post below on why Samsung has an advantage in vertical alignment. Nokia's going to bleed themselves to death on the low end and never get the cache that AAPL does on the high end. They may sell a lot of phones and still end up losing money quarter after quarter.
A reasonable comment like that one deserves a reasonable response.
Yes. You do need to have larger margins if you are Nokia. Why? Because Nokia is not Samsung. They don't produce their own chips, screens, cases, etc. Samsung does. Trust me. I live in Korea. Their factories are everywhere.
Nokia has to pay for everything from Snapdragon processors to even the Windows 8 platform, now that the platform support period has ended and Nokia has to pay the royalties.
So if Nokia makes 30 miserable bucks on every phone, they will never be able to turn a profit once other expenses (R&D, marketing, etc.) are taken into account. This is still a huge company with more employees than their competitors. Expenses are everywhere. They need to turn a larger profit from their phones. Such razor thin margins won't cut it.
They can't win a price war against a company that manufactures all its parts AND uses a free ecosystem. Think about it. It's impossible.