Ronnie05's Blog

Nokia X2: A disruptive pricing indicates change in Nokia’s strategy.

Posted in Mobile Devices and Company Updates by Manas Ganguly on May 7, 2010

A few years back 5 Megapixels was the biggest and best thing that happened to mobiles and Nokia ruled the roost. But then iPhone changed a few things and they have remain unchanged ever since.

Under severe pressure to arrest the market share de-growth and the competition from white label manufacturers especially in strongholds like Asia and Africa, Nokia announced the X2.The X2 features a 2.2 inch QVGA display, dedicated music keys, dual speakers, Bluetooth 2.1, 3.5mm headset jack, FM radio, Nokia Messaging, Facebook integration, MicroSD card support and runs Nokia’s proprietary S40 OS. On the imaging front, it has a very impressive 5 megapixel camera at the rear. It is expected to retail in India is Rs. 5000 (~110). That is a very disruptive price from Nokia especially because Nokia’s 5MP range starts at Rs.12,500 (~$281).

This answers a local competition from Spice and Micromax who were retailing 5MPs @ $120 whereabouts and is a very aggressive move aimed to regain the mid end markets.With Nokia’s equity and such a hugely aggressive price, the mid end markets would go for the X2.

A few thoughts about the X2
1. Nokia is betting some serious volumes on the X2 because the $110 price would mean razor thin margins and the realizations would only be in terms of volumes.
2. The Indian market in the 4-6K price segment is about a Million and more units strong. Nokia seems to be taking a huge bet and aiming to take 75% of the market basis the X2. That would edge out a lot of wannabees from the market.
3. Expect the X2 to be a short lived product with about an year at maximum for it. Also a lot of price movements on the X2 may not be expected because of thin margins.

Overall the X2 is possibly a departure from the Nokia strategy of market skimming at launch, and then regular price drops amortized by volumes.The X2 which will possibly be released at a much lower margin realization will be firing on volumes from the word go and will not see too many price drops. Nokis is betting big on its big volume ability: something that other competitors lack.

Interesting bet from Nokia, but it seems that the beleaguered market leader is burning out its margin game faster than one expects it to. Possibly the X2 is to maintain the channel revenue realizations while Nokia readies its services for launch. We will watch this one as it develops.

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