Nokia, the world's biggest mobile phone manufacturer, has cut prices of its handsets by up to 10 per cent as the battle for market share heats up.
Manufacturers are under increasing pressure because of slower demand in Western Europe, especially for more expensive handsets. However, surging sales of cheaper phones in emerging markets helped the Finnish giant to increase its market share in the second quarter from 40 to 41 per cent.
Geoff Blaber, analyst at CCS Insight, said: “A lot of the cuts were made in Nokia's music portfolio, which is its mid-tier. That's a particularly competitive segment. There have been some new products from Sony Ericsson and, really, it is Nokia pinpointing particular competitors.”
Sony Ericsson's market share fell to 8.2 per cent in the second quarter, from 9.5 per cent the same time last year, pushing it from fifth to sixth place. The group said last month that it would cut 2,000 jobs and forecast that the remainder of the year would be “challenging”.
Mr Blaber said that Nokia was also focusing price cuts in the higher end of its portfolio, such as the multimedia N81 handset, which competes directly with Apple's iPhone 3G that went on sale this month.
Ben Woods, research director at CCS Insight, said: “Nokia has always been extremely tactical with its pricing, pinpointing sweet spots in different segments of the market and making adjustments to wrongfoot competitors.”
In a research note, Mr Woods wrote: “Nokia remains the unassailable leader in the mobile phone market. This quarter only served to further underline its dominance. We expect Nokia to get even stronger in the second half. Worsening market conditions could serve to strengthen Nokia's market share given the resilience afforded by its strong brand, substantial global footprint and immense economies of scale.”
One motive for the price cuts is to make way for Nokia's new SuperNova multi-media phone range with integrated music players.
The price cuts from Nokia, which controls 40 percent of the cell phone market, will put further pressure on its smaller rivals like Sony Ericsson, which has focused on music and camera phones. Sony Ericsson made practically no money in the April-June quarter, and said it would cut 2,000 jobs as it forecast the remainder of 2008 would also be tough. Struggling Motorola has made losses since its flagship RAZR phone lost appeal among consumers. Nokia increased its market share to 41 percent in the second quarter, helped by surging demand in emerging markets.
