Just a few years, Nokia’s feature phone was the most popular symbol for a phone. There were no smartphones, so of course, no one knew that these phones were dumb. Now, even though innovation has taken far beyond those texting-calling boxes, 13 out of 20 of the bestselling phones in the world are still coming from Nokia’s house. This figure might come as a surprise to those that are following the Finnish company’s profit and revenue figures. Those problems arise because feature phones remain the largest part of Nokia’s production in terms of volume, but their ASP’s, margins and revenues have been sliding for years now. How long can Nokia sustain this?
Nokia’s quarter-on-quarter phone sales for the last 10 quarters don’t tell a very interesting story. Average sales seem quite static at about 85 million and an upward graph is seen only at the end of 2012. When Asha’s volume is extracted separately from the overall sales figures, it becomes evident that this hybrid line is propelling the rising trend since the last two quarters. Nokia has defined Asha quiet loosely between smart and feature, but officially the line still belongs in the feature phone portfolio in the company’s books. The Average Selling Price (ASP) for the phone is about $81, and it has Veblen good-like tendency to sell more at higher prices.
This ASP is largely responsible for balancing the overall falling ASP in the feature phone arena. As of Q4 of 2012, the overall ASP for feature phones was at about $43 and would have been $36 without Asha. The gross margins also saw a slight spike in the last two quarters, which was a welcome change from the consecutive fall since October of 2011.
Looking ahead at 2013, the feature phones story does not seem like a pleasant one. Sales are estimated at about 60 million, which is the lowest in the last few years. In China, which is a key smartphone market in the coming year, the company saw a 21% QoQ and 69% YoY decline at the end of 2012. ASP’s are also expected to dip lower, barring the Asha line, to about $35. The company has announced that it will focus on “upper end” phones. Falling volumes and margins in the dumbphone section are bound to drive prices into the ground.
