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Nokia cuts phone prices as market growth returns

Mon, 02/01/2010 - 4:51am

(Reuters) - Nokia (NOK1V.HE) cut phone prices across its portfolio in late January, putting its cheapest smartphones on a collision course with mid-range phones from rivals Samsung (005930.KS) and Sony Ericsson.

Nokia said price changes were part of its normal, ongoing business. The world's top cellphone maker usually cuts prices across its portfolio a few times each year.

Several industry sources told Reuters Nokia had cut prices by up to 10 percent.

After the price cut Nokia's cheapest smartphone model, the 5230, retails for around 170 euros ($239) in Finland. The model's wholesale price is now below 120 euros.

Demand for cheaper smartphones has helped the segment grow despite the recession, defying the broader, weaker industry trend. Sales jumped 30 percent in the October-December quarter according to research firm Strategy Analytics.

Nokia said last week that revenue from smartphones jumped 26 percent in the quarter from the previous quarter to 3.9 billion euros, helping power its overall result. The average wholesale price of its smartphones dipped to 186 euros from 190 euros in the third quarter.

The falling prices have hurt handset vendors like Sony Ericsson (6758.T)(ERICb.ST), who have focused on mid-range or feature phones, which often boast good cameras or music players but lack computer-like open operating systems.

These have been cheaper than smartphones, but the price difference is declining fast.

"This latest round of price adjustments sees Nokia taking its low-cost Symbian devices into new territory," said Ben Wood, research director at CCS Insight, a British firm that tracks the wholesale prices of mobile phones in Europe.

Nokia's price cuts come as the industry returns to growth following a grim 2009 marked by recession-hit consumer demand. Nokia says it expects the cellphone market to grow 10 percent this year.

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