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Nokia faces the feature phone collapse it dodged in 2012

Published Apr 18th, 2013 9:25AM EDT
Nokia faces the feature phone collapse it dodged in 2012

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In the spring of 2012, Nokia started rolling out a broad new range of Asha feature phones and managed to astonish Wall Street for a couple of quarters. The phones actually sold. Priced at 60-90 euros, they were cheaper than even cheapest Android smartphones and had a sleek, glossy new look. They offered many advanced features like downloadable games and great email support. For a while, Nokia enjoyed an Indian summer — feature phone ASP only declined by -3% during the third quarter in 2012.

And now the respite is over.

Nokia shipped as many Lumia phones during the first quarter as Wall Street expected but the Asha magic has evaporated and feature phone ASP levels are now tanking hard once again. The average price of Nokia’s feature phones tumbled by a drastic -15% year on year, while feature phone shipment volume dove by -21%. This is a truly dangerous combination; even steep price cuts are not helping the moderate sales decline.

The geographic patterns are grim. The weakest markets for Nokia are now China and Africa — the two high-growth regions where Asha models were expected to have the most impact. The old stronghold of Africa delivered a stinging -32% sales drop. Nokia’s year on year device sales decline in Latin America hit -24%. During the autumn of 2012, Nokia was still enjoying +14% LatAm growth. This brutal reversal is very likely driven by the flood of cheap Asian Android models swamping Brazil. These markets are absolutely vital to Nokia. If it cannot fend off low-end Android competition in Brazil, Nigeria and Guangzhou, the game is lost.

The only hope now is to ramp up low-end Lumia sales fast enough that they offset the rapid erosion of the feature phone unit. This will be an enormous challenge.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.