(NOK) Nokia Lowers Phone Prices

The world’s largest mobile phone maker, Nokia Corporation (NOK) recently reduced the price of its three very popular smartphones N8, C7 and E6 by 15%. The recent price cut will enable Nokia to retain its market share as well as to target the middle class segment.

Earlier, the company stunned everyone by lowering its second quarter revenue guidance based on lower Average Selling Price (ASP).

Presently, Nokia’s most widely used symbian operating system is lagging behind Google Inc’s (GOOG) most popular Android operating system. Currently, Symbian holds 31% market share while Android boasts a 34% market share.

Currently, Nokia faces stiff competition from Google’s Android-based smartphones and Apple Inc’s (AAPL) iPhones. Moreover, Nokia’s portfolio lacks a tablet, which will likely hurt profitability in the long run. Nokia desperately needs a smartphone to outperform the broader mobile phone market. Nokia has thus teamed with Microsoft Corporation (MSFT) to install Windows Phone 7 software into their mobile phones, as an attempt to retain its market share.

However, we do not expect any Windows 7-based smartphone roll out before the end of 2011. Further, we expect Nokia to gradually lose market share since we do not find any product in Nokia’s existing portfolio, which is unique in the market and will allow the company to drive revenues.  Apart from stiff competition and lack of new products, there are other factors like rising costs and slow economic growth that may act as headwinds for the company going forward.

According to IDC reports, Nokia’s new Windows 7-based smartphones will likely overtake Apple’s market share by 2015. According to these industry analysts, these open source handsets platforms will be of much demand going forward, thus giving strong competition to Apple and BlackBerry handsets.

We, thus, maintain our long-term Neutral recommendation for Nokia. Currently, Nokia has a Zacks#3 Rank, implying a short-term Hold rating on the stock.

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