Nokia is winning the price war

DESPITE PROTESTATIONS that there is no price war, it's becoming increasingly obvious that Nokia is winning it.

The company has just released its results for Q4 2006 and both volume sales and profit margins were up. Its operating margins for its Mobile Phones business improved from 17.1 per cent to 17.8 per cent. Compare that with Motorola's 4.4 per cent.

Nokia's CEO, Olli-Pekka Kallasvuo, told the FT that, "Our latest results are an illustration that if there was a price war, we were not participating."

Funny, then, that Mobile magazine has just reported that in the UK Nokia has just cut the prices on 43 different handsets and the typical reduction is around 10 per cent.

A source told Mobile, "In the eight years I have been working with Nokia, I have never known them to drop the price on much more than ten handsets at a time."

Sound like the action of a vendor involved in a price war, doesn't it?

Nokia's figures for the emerging markets show that its strategy is paying off there too. It is competing hard at the low end and enjoying upgrades to its latest products as a result.

So where is Nokia going wrong? Only in North America, it appears.

According to Martin Garner at Ovum, Nokia has "suffered a sales decline in the US, where its portfolio is not right and where its retreat from CDMA has reduced volumes."

Garner blames part of this 'portfolio' problem on the lack of acceptance for its smartphones - the N70, the N73 and the N91.

That's despite the fact that the company claims the total market for smartphones in 2006 was 80 million units and that it shipped half of them (40 million).

So what's Nokia going to do? It's going to "launch phones based on its Thin platform", according to Ovum. Thin, eh? Would that be razor thin, perhaps?

Anyway, Nokia says it isn't scared by Apple's iPhone. Indeed Kallasvuo welcomed it as "stimulating" the market.

Significantly in his advice to Nokia on what to do next, Garner says, "Finding some adequate resolution with Qualcomm on royalties" Might not be a bad idea.

He's right. Anything that could drive 3G chipset volumes up and prices down would benefit the market as a whole. µ