After posting another quarterly decline in sales but steadily rising unit numbers for new-generation smartphones last week, today Nokia pressed ahead with yet another smartphone launch that will fill out its line of more affordable devices. Today it launched the Lumia 625, a Windows Phone-powered, 4.7-inch-screened, 4G-capable smartphone. Nokia says it will be “accessibly priced” — estimated retail price of €220 before taxes and subsidies, in other words some €400 less than the newest high end device, the 1020.
“With our largest smartphone screen to date, the Nokia Lumia 625 is a perfect example of how Nokia is delivering leading smartphone innovation and experiences at every price point,” said Jo Harlow, executive vice president, Nokia Smart Devices, in a statement.
As with other Lumia devices, these will be colorful and plentifully distributed. Orange, yellow, bright green, white and black are the base colors for this model, with an array of changeable shells “enabling easy personalisation.” Nokia says the Lumia 625 will begin selling in China, Europe, Asia Pacific, India, Middle East, Africa and Latin America in Q3 2013.
The move comes after the company unveiled its highest-end and priciest smartphone yet earlier this month, the Lumia 1020 — with a groundbreaking 41 megapixel lens.
Nokia needs to work hard to bring up volumes in smartphones to make up for the drop off of legacy Symbian sales, which are now discontinued. In last week’s Q2 earnings, Nokia’s smartphone sales by volume were down by 27% over a year ago, while its “mobile phones” segment (its term for the rest of the portfolio, covering feature phones) was also down by 27% to 53.7 million units. In value terms, sales of smart devices were down 24% to $1.5 billion (€1.1 billion) compared to last year, while mobile devices were down 39% to $1.8 billion (€1.4 billion).
Part of that strategy includes targeting new smartphone users, who either are later adopters in developed markets, or people living in countries where smartphone adoption is still at early stages. In both cases, users are less inclined to pay the premium prices that early smartphone adopters have paid. And traditionally, Nokia has done well in both segments.
With the rise of Samsung, of course, that tide has changed, with the Korean handset maker effectively replicating Nokia’s traditional, device-for-every-price-point strategy, and surpassing the Finnish company in the process. In that regard, if Nokia is aiming to claw back some of what it has lost, and to do it at this point in the smartphone adoption cycle, producing more affordable models is essential.
What’s telling is that this is the first “accessibly priced” 4G device. This is significant for a number of reasons. It points to device being intended, at least initially, for developed markets that already have 4G networks, rather than for emerging markets. This is still a very ripe market for the taking — as Asymco recently pointed out, countries like the U.S. actually are showing little sign right now of smartphone adoption slowing down — in fact at the moment it looks like adoption is some of the highest its been over the last 14 months. What may be the case, though, is that those picking up devices now are likely to pay less than those buying the first iPhones.
The lower cost of the device, meanwhile, could mean one of two things: the pricing for 4G components is starting to come down as we see more critical mass. Or, Nokia is letting itself get hit on margins for the sake of being more competitive. This is what CEO Stephen Elop said last week on margins, specifically for Lumia devices, during the earnings call:
“We have to think carefully on pricing strategies. With some devices like the 1020, we don’t sense price pressure on this in the early period, but with other devices… carriers will throw in a Galaxy phone or tablet and who knows what else is in their inventory and throw out there for £20 per month. We do sense there is price pressure that we will have to respond to.”
Take that as you like, but I wonder if this 625 will be an example of that price pressure that Elop alluded to.
Last but not least, there is a question about consumer demand. Are consumers demanding low-cost 4G handsets right now? I know that in the UK, EE, which still has a wide open, uncontested playing field for 4G/LTE services, is scrambling very hard to make sure it has a nice number of users locked into its network before others like O2 and Vodafone and Three come storming in and spoil the party with more competitive pricing. That means, carriers like EE will be pushing handset makers very hard to bring those prices down on devices. Whether low pricing is being dictated by market forces and consumer demand, or carrier pressure is not really clear here.