Blog Post

3 reasons a $49 Lumia 900 price drop won’t help Nokia

Starting Sunday, AT&T(s t) is offering Nokia’s(s nok) Lumia 900 smartphone in a new color and a lower price for all models. The Lumia 900, debuting just three months ago for $99.99, is now available for $49 .99 with contract. A pink version is added to the lineup but a new color and relatively large price cut may not be enough to boost sales.

Late last week, Horace Dediu closely inspected the smartphone sales numbers from both comScore and Neilsen and deduced that Nokia has only sold around 330,000 Nokia Lumia devices in the U.S. last quarter. His math and logic appear reasonable to me, although we’re dealing with estimates.

Still, even if Nokia sold 500,000 Lumias — what I think is an extremely generous rounding up on my part — compared to the number of iOS(s aapl) and Android(s goog) devices, that’s a drop in the bucket. It’s not good for Nokia nor for Microsoft(s msft), when a large carrier such as AT&T isn’t building the Windows Phone user base in a meaningful way. And I can think of at least three reasons why the $49 price drop isn’t likely to change the situation.

First, for not much more money, AT&T customers can buy a new Android phone with the latest hardware and software; think of the new Motorola Atrix HD that debuts at $99, for example. Regardless of my opinion that Windows Phone is a solid operating system with a generally positive user experience, potential buyers will look at a phone like the Atrix HD and see a more powerful device: super-clear high-definition display and HDMI out, for example. While specifications matter less than they did in the past, they can make a good first impression.

“What do my friends use?” is reason number two. If a potential customer comes in to the store having seen their friends using Android phones, services and apps, they’re less likely to give Windows Phone a look; unless they’re very open-minded, that is. And with Android accounting for the majority of smartphone sales in the U.S., you can bet these customers have far more friends with Android devices than with Windows Phone handsets. Also hurting is the fact — reason number three — that the Lumia 900 won’t see Windows Phone 8 when it debuts later this year (subscription required). Android products aren’t known for timely software updates, but at least there’s hope for them; not so with the Lumia 900.

It’s a shame for Nokia and Microsoft — at least, if I’m correct and sales don’t jump after this price drop — because they have good products. But as I’ve noted time and again, the mobile market is one of momentum. Fall behind your competitors and it becomes more difficult to stand out from the pack and challenge the incumbents due to social trends, mobile app lock-in costs and the fast paced changes in hardware.

21 Responses to “3 reasons a $49 Lumia 900 price drop won’t help Nokia”


    Not sure I bought my lumia 900 last week knowing about the upgrade. Will buy the W8 one in a few months when it comes to the market. I do not buy on contract any more so it is cheaper in the end.

  2. Anton Yakovlev

    I’m using Lumia 800. The only reason I didn’t think of 900 is that there are very few differences between them. And 800 is a perfect device.

  3. Luis Novais Reis

    I bought a Lumia 610, only because in my country, Vodafone put an outrageous price for the Lumia 900 (239 euros for the phone and a 2 year contract of 60 euros/month).I’m very satisfied with it. I cannot understand all the bad prophecies about Nokia future. If I was at US I did not hesitate a minute! Great model!

  4. Weej101

    Great review. I just bought the HTC titan off Ebay. I really wanted the Nokia Lumia 900, but due $$, I decided to go with the HTC Titan. What I like about the Windows OS is the fact that OS is very clean. I used to have an iPhone 3gs before it broke and the LG Optimus on Virgin Mobile. I like the big tiles on the Windows OS. The home screen is cleaner than both the iOS and Android. All Windows phones are supposed to get the 7.8 upgrade, which from my understanding, will allow for most of the new apps(unless I misunderstood microsoft presentation about it in June)

    • Martin

      yes you misunderstood. no app developed for WP8 will run in WP7.8. Also the development for WP7 is “finished” as the code will not be usable in WP8. so all new apps will be for WP8 and none for WP7(.8)

      • HASSIA

        That does not make any sense. If you are a developer you would want to reach as large an audience as possible. Therefore I would argue the developers will continue to make apps for win 7.8 then upgrade them later.

  5. At this point, the “Partnership’s” problem is probably penetration rather than sales. If they can grub that budget smartphone area and still offer value it should work easily. Especially in third world countries where there is a huge demand for budget computing.

    Microsoft are very clever. To compete with Sony years ago they at first sold the Xbox at a loss and picking up the profits in software. Something they have done for a long time. and always manage to make money.

    Nokia hardware is quality through and through. This move looks like another penetration strategy. To top it all up Nokia will be churning out Windows Tablets.

    Don’t be fooled, these guys are pushing this devices out in the market for penetration and they are also going to make sure that the corporate market stays with Windows.

    • Mobile Phones Fan

      >> “Microsoft are very clever. To compete with Sony years ago they at first sold the Xbox at a loss and picking up the profits in software.”

      Unfortunately, that lesson from last decade’s gaming consoles would be horribly misapplied in today’s smartphones market.

      Microsoft’s ‘fast follower’ strategy relies on competitors who are slower and/or oblivious to changing market conditions. Better still if they are simply incompetent and it really helps if you can outspend them. All of these factors were in play in the console biz.

      Obviously, Microsoft could easily spend Nintendo into the ground. But they also caught Sony at a time when that commpany’s traditional strength in televisions had waned. Sony was spending more money on R&D and marketing, while profits were falling.

      Even former XBox executive Robbie Bach attributes much of Microsoft’s success to mistakes made by their two main competitors: Sony and Nintendo. Not sure if this site takes outbound links, so just Google “microsoft xbox sony mistakes”.

      But this situation is completely opposite what Microsoft now finds in the phone market. Where can Microsoft capitalize on their competitions mistakes? If Google and Apple have screwed up somewhere, you sure can’t tell by their ever-rising sales figures.

      Can they beat them with piles of cash? Hardly. Google is easily their equal, while Apple makes more than Google and Microsoft combined. Meanwhile, Microsoft’s Online Services Div. is bleeding $2 billion annually and they just took a $6 billion write-down for Acquantive.

      Ok, so how about beating them on speed? The answer to that is, “Oh, be serious!” Both Apple and Google iterate faster than Microsoft — in Google’s case, perhaps 3x-4x faster. Microsoft has gone years between major OS updates; there’s simply no comparison.

  6. Droidfan

    There are 2 more problems with Lumia 900/WP7. The metro tile UI is just not appealing to a large number of people. It was fresh…maybe even a little sexy…a year and half ago. When you look at Android and iPhone….well. iPhone sells on its own momentum. In the showroom there will be 3 or 4 Android devices. Each with a different look on the home page. Immediately, the potential buyer can see how different their phone might look. Very appealing.

    Second, WP7 is a walled garden ecosystem. MS sell that as a virtue. You will have uniform experience. Updates…such as they have been..will be uniform. Well except for the Lumia 900. But if a potential Buyer is looking for that walled garden experience…why not just buy a perfectly fine…iphone 4S?
    Lets face it…Apple is succeeding with one great phone. Android is going full steam ahead with many very, very good phones. And with the release of Jelly Bean…probably several great phones as well. Where is the place in the market for WP to get a foot hold. It’s said WP8 is going to be the killer phone. Folks, iPhone and Android aren’t sitting around with their hands in their pockets. By the time WP8 hits the market…Verizon showrooms are going to be packed with great alternatives. Probably visibly better than the WP8.

    • Mobile Phones Fan

      The problem with Windows Phone is that it’s a product with no compelling sales pitch. It neither solves a recognized problem for consumers, nor does it fill an obvious gap in the cornucopia of phones on today’s market, nor does it provide the retailers with easily identifiable, unique selling points.

      When Android appeared, it had all of those things going for it. It was ‘like’ an iPhone yet less expensive.Where the iPhone offers a largely closed system, Android invites customization and tinkering. And with dozens of models — from many manufacturers, all over the world — introduced every month, Android offered more USPs than your local sales rep could shake a stick at.

      By trying to be all things to all people, Windows Phone is taking a knife to a gunfight …it walks into a slew of potential objections to each sale. Want a customizable phone? Choose Android. Want a smooth, fluid UI experience? iPhone is the recognized champ. Want the latest, most stylish handset? WP is not the clear leader. Want the latest apps? You’d better skip WP.

  7. Adam C

    The problem with windows phone is the same one with android there will be no upgrade of OS.

    If nokia is paying MS for the OS, it is in MS interest to see nokia sell more hardware which is also nokia’s objective.

    I believe windows phone will not be upgradable.
    But I may be wrong.

  8. I agree with all statements here, although I’m not as sure that the lack of a WP8 will be a deal breaker for many first time buyers – unless that’s the story told by the sales reps. I would have ended the post on a more positive note though: especially the ‘familiarity factor’ will be improved a lot once Win8 starts appearing on PCs, suddenly making a WP8 phone a ‘familiar’ choice for millions of people. There’s hope yet.

    • Mobile Phones Fan

      >> “although I’m not as sure that the lack of a WP8 will be a deal breaker … unless that’s the story told by the sales reps.”

      Bingo. ;-)

      Face it: if you’re the local retailer (or underpaid salesman), do you want to see customers coming back in 5 months asking why you sold them a non-upgradeable phone? And one they are likely stuck with for the next 1.5 years? And all the while, they keep hearing about cool new games or popular new apps …that they can’t use?

      Seems like the opposite of good customer relations, to me. If you want to convince them you’re a greedy louse or a thoughtless jerk, then just get it over with a time of sale — stick a live rat in their shopping bag, along with your business card. It’ll have pretty much the same effect, plus there’s no need to wait until this fall’s WP8 release. ;-)

  9. How much is Nokia getting per phone? It’s getting more than the carrier charges. For example, if you buy an iphone 4S without a plan, I think it is $600 versus the $200 with plan. So Nokia may be making $350 to $450 per phone. If 500K phones were sold in a quarter, that is $175M to $225M. That’s one quarter, over 4 that could potentially by $700M to $900M.

    My math could be way off, but that’s no drop in the bucket. One of the biggest problems I see with the media now is that if a company doesn’t make as much as Apple, they are doomed for bankruptcy (maybe Nokia is b/c its costs may be way over this). But, isn’t there room for a company that just makes billions of dollars instead of hundreds of billions of dollars? Perhaps, perhaps not. Maybe this type of company won’t be able to keep up the R&D that Apple is able to throw at the mobile industry.

    • Mobile Phones Fan

      >> “How much is Nokia getting per phone? It’s getting more than the carrier charges.”

      Sure, tho’ if you’re going to consider — or guess at ;-) — Nokia’s sales-revenue, don’t forget to consider the other side of the balance sheet.

      Independent analysts tell us that Nokia’s costs are rising. Just one example, iSuppli says the Lumia 900 costs significantly more than Apple’s iPhone 4S. Plus, both Microsoft and the carriers are forcing Nokia to spend more on promotion, including in some steep discounts — thousands of free Lumia 900s were given to AT&T sales reps.

      Then there are costs due to screw-ups. Recent IDC and Gartner figures indicate that a worldwide shift to inexpensive Android handsets has forced Nokia to eat millions of unsold feature phones. Meanwhile, after firmware glitches appeared in the Lumia 900, Nokia issued $100 rebates to every buyer during first couple months of sales.

  10. If Nokia was able to not make an obsolete at birth phone, they would of had a chance. The OS isn’t baked yet, I returned one and it was free!

    • Those pitifully low sales of the Lumia 900 were all done BEFORE Microsoft said that they can’t be upgraded to W8.

      You can’t blame the poor sales on the 900 being made obsolete, but now that people know this there will be very few more sold.

  11. sfmitch

    The current Lumias have been Osborned. Sadly, the only people who will buy the current models are those who don’t know the products have been abandoned by Microsoft. How happy do you think those people will be when they find out?