Thanks to the mess Nokia has made with their smartphone sales, the world may be in for some quick savings. Nokia’s profit margins are falling hard and this means lower prices for buyers.
With the advent of the “burning platform” speech, Nokia has since done a nose-dive financially speaking. Their smartphones are not becoming something that people would want to buy, with the exception of the N9. The N9 is a super smartphone, but for some reason Nokia seems to have limited sales of it. The cheaper “dumb” phones that are still being manufactured by Nokia are the actual profit makers now. Nokia has a profit margin of 6.2 percent for smartphones and 16.4 percent for dumb phones.
With such a small profit margin, the financial nose-dive has put Nokia behind Apple and Samsung in Europe. This is quite an embarrassment since both are from regions other than Europe, where Nokia has its own headquarters. The dilemma is not going to go away soon. Nokia is in a transition with their new partner Microsoft. The CEO, Stephen Elop, has stated that they must accelerate the pace of transition. If he sounds a bit desperate, it could be because they are now third in sales in their own backyard when they were first.
What does this mean for smartphones prices ? In the long haul it means that across all sales, Nokia is taking a big hit. In the individual sales it means there are no large cuts in price. The company is expecting to see operating margins materially below its expected ranges. The reason why is the contracting sales results. The good news for buyers is shrinking sales create shrinking prices.
The bright point in sales for Nokia is the N9. This is an uber smartphone with plenty of power and ability. It is designed around the Meego platform, the Nokia answer to Android. The camera is great, like most high end Nokia smartphones and it has high end specifications. But the fact remains that the N9, for all its usefulness is called an orphan in mobile circles. There will not be a replacement since Nokia is adopting the Windows Phone 7 platform for its future smartphones.
The credit rating for Nokia has been cut by Moodys. Profit warnings have been issued by the company for its investors. It almost looks like the world is abandoning Nokia. The CEO is still promising that Nokia will come back in 2012 with their partner, Microsoft. They plan on regaining their position in the mobile world with Windows Phone 7. Here is hoping it will not just be a slow ride into the sunset.
