Nokia cuts prices to provoke a price war

Posted on 31 Jul 2008 at 17:32

Nokia has slashed prices for a number of its handsets this month, as it looks to provoke a price war with some of its rivals, who are already churning out thin profits. Nokia has cut up to 10 per cent off selected music and media phones, and smaller cuts across the rest of its handsets.

The move follows a gloomy spell for handset manufacturers as sales for high-end phones have started to drop in Europe and the US due to the global credit crunch.

David Hallden, analyst at research firm Cheuvreux, reckons Nokia's move will put even more of a burden onto its competitors.

"This is basically a way to run away from competition. You're putting a lot of pressure on your less competitive peers," he said.

According to news agency Reuters, Sony Ericsson made "practically no money" over the April-June quarter. The firm announced it would cut around 2,000 jobs as it reckons the of 2008 would also be tough.

Motorola is also struggling as it has made losses since the Razr lost its appeal among consumers.

LG and Samsung, however, are better place to enter a price war with Nokia, with both making healthy profits over the past three months.

"Nokia has always been extremely tactical with its pricing, pinpointing sweet spots in different segments of the market and making adjustments to wrongfoot competitors," said Ben Wood, research director at analyst firm CCS Insight.

Nokia declined to comment on the price cuts. "If we started to comment on prices, there would be no end, they are changed so often," said a company spokesperson.

Author: Dawinderpal Sahota

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