Nokia Reshapes Strategy to Undercut Android with Low-End Windows Phone Smartphones

Nokia Cuts Projects, Workforce, In a Bid to Offer Lumia for Wider Market Segments

by Anton Shilov
06/14/2012 | 11:16 PM

Nokia Corp. on Thursday announced major changes to its strategy and tactics going forward. Under the new strategy, Nokia will cancel a number of projects in a bid to focus on the things its management considers as "key" to Nokia; besides, the company will lay off 10 000 of employees by late 2013. A major tactical plan now is to release low-cost Windows Phone-based smartphones to grab market share from inexpensive Google Android handsets.

 

"We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia. We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions," said Stephen Elop, chief executive officer and president of Nokia.

Nokia Wants Price War Against Android

Sales of Nokia smartphone product line - which now consists of rapidly declining Symbian-based devices and unpopular Windows Phone-based devices - dropped even more considerably than Nokia previously expected, the company said. As a result, the firm badly needs to quickly boost sales of its Lumia devices with Windows Phone 7.5 "Mango" operating system. In particular, Nokia vitally needs to address cost-efficient segment of smartphones with a platform that has prospects for future growth.

Given the fact that at present the low-end smartphone part of the market is dominated by Google Android-based devices, Nokia needs to offer lower pricing since this is exactly what users need. Apparently, Nokia had been given "specific support to get to lower prices than Nokia had a sight to" by Microsoft. As a result, the primary task of Nokia now is to offer an aggressively-priced Lumia handset with Windows Phone operating system. The main competitive characteristic of such handsets will be price: it should be lower than that of Android-based devices.

"We need to compete with Android aggressively. The low-end price point war is an important part of that," said Mr. Elop during the conference call with investors.

In short, Nokia plans to engage itself into a price-war against such players as LG Electronics and Samsung Electronics in addition to various low-cost makers like Huawei. What is unclear is whether Nokia can now actually handle this. Financial capabilities of the company nowadays are rather weak and a price-war in the low-end can rapidly spread to higher-end models further reducing Nokia's opportunities to earn profits and will deepen its losses.

Significant Reductions of Expenses Incoming

In a bid to significantly reduce its operating expenses and return the company to profitable growth, Nokia plans to: