*from www.bloomberg.com, April 29, 2013 (To view original article click here.)
Take Away #1: As Nokia Oyj struggles to catch Apple Inc. (AAPL) and Samsung Electronics Co. on the market for smartphones costing $500 or more, it’s counting on a bare-bones handset that sells for just $20 to give it an edge.
Key Facts and Figures:
- Priced 97% below the latest iPhone, the Nokia 105 features preloaded games, a color screen, a radio, a speaking clock, and a flashlight.
- The phone, Nokia’s cheapest ever, has been available for a few weeks in India and Indonesia and will soon start selling in Europe.
Take Away #2: Even with its bargain basement price, the Nokia 105 is critical to Nokia’s entire handset business.
Key Facts and Figures:
- Nokia reported April 18 that it sold about 11 million fewer mobile phones in the first-quarter than analysts had projected.
- Sales of basic phones plunged 21% to 55.8 million units.
- A failure to revive the low-end business would leave Nokia without an important source of cash as it seeks to develop devices to challenge the iPhone and Samsung handsets running Google Inc.’s Android.
Take Away #3: While demand for the iPhone and Android devices have made smartphones the fastest-growing part of the market, basic handsets still make up more than half of units sold.
Key Facts and Figures:
- That means hundreds of millions of phones each quarter.
- The low-end market has been dominated by Nokia until Asian manufacturers such as ZTE Corp., Huawei Technologies Co. and Samsung started challenging it more aggressively.
- Nokia says the 105 will be profitable, but declined to provide any details.
- Liberum estimates Nokia will enjoy a margin of about 20% on the device.
- Of the 336 million handsets Nokia sold last year, only about 10% were smartphones.
- Basic models accounted for 31% of Nokia’s revenue, versus 218% for smartphones.
- Network equipment made up most of the balance.
Take Away #4: Nokia had more than half of the mobile handset market before Apple introduced the iPhone in 2007.
Key Facts and Figures:
- Nokia shares have fallen more than 80% since then, while Samsung has risen 154% and Apple has quadrupled.
- After five consecutive annual losses, Nokia is down 14% this year through April 16.
- The stock rose 0.7% to 2.52 euros at 4:32 p.m. in Helsinki, valuing the company at 9.44 billion euros.
Take Away #5: Nokia is counting on cheaper phones like the 105 to build trust in the company’s brand in growth markets such as India and China.
Key Facts and Figures:
- The company reasons that customers who buy a 105 will stick with Nokia when moving to more expensive devices in the years ahead.
- “The low-end, high-volume part of the mobile-phone market is a huge opportunity for Nokia in developing countries,” said Francisco Jeronimo, an analyst at IDC in London.
- “These users will be likely to upgrade to more expensive phones over time, so it’s a good strategy to keep a high market share in this segment,” says Jeronimo.
- The 105 is “very competitive” and should help Nokia with its low-end recovery effort, said Neil Mawston, an analyst at researcher Strategy Analytics in London.
- A predecessor to the 105, called the 1280, sold more than 100 million units over three years.
- Simpler phones have “been the bedrock of Nokia’s business for the past decade,” Mawston said.
Take Away #6: Nokia’s expertise in handset production makes it possible to turn a profit on a $20 phone, Jeronimo said.
Key Facts and Figures:
- For years, the world’s largest mobile-phone maker and now No. 2, Nokia made more than 600,000 phones a day in seven factories around the world, using parts from suppliers it knows well.
- Chinese rivals may be able to make a device as cheap as the 105, but they lack the features and services from Nokia, Jeronimo said.
- The candybar-shaped 105 is 25% cheaper than the Nokia 1280, yet its battery lasts 56% longer — 35 days.
- The phone is resistant to water and dust and comes with text- message-based tools that teach English and provide basic health- care advice.
- Despite such features, the company sought to simplify the phone’s software, which in turn allowed it to use cheaper parts, said Dirk Didascalou, head of R&D for Nokia’s mobile-phone business.
Take Away #7: Even as the slump in simple handsets has stolen investor attention, Nokia’s main goal is to make a full recovery in smartphones, where profit margins are widest.
Key Facts and Figures:
- Apple (AAPL)’s 32-gigabyte iPhone 5 sells for $750, while Samsung’s Galaxy S4 goes for about $640 and Nokia’s flagship Lumia 920 is $450.
- Nokia sold 5.6 million Lumia phones, which run on Microsoft Corp.’s Windows, in the first-quarter up from 4.4 million in the previous three months.
- However, the iPhone and Android control more than 90% of the smartphone market, while Nokia has just 3%, according to Strategy Analytics.
*To view original article from www.bloomberg.com click here.