Is India Not Good Enough for Nokia?

Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

On one hand, the Finnish phone maker Nokia (NYSE: NOK) is getting ready to launch the latest Lumia 820 and Lumia 920 smart devices powered by the Windows Phone 8 platform from Microsoft (NASDAQ: MSFT) in the US and select European countries, and on the other hand Nokia just entered the Indian market with its now back-dated Lumia 900 device powered by Windows Phone 7.5.

This move of the phone maker has started attracting few vital questions, such as:
>> Isn’t Nokia a little too late to enter the Indian market with the handset?
>> What is Nokia’s perception of the Indian market?
>> Is this a strategy to dump the excess Lumia 900 stock so that the company can march ahead with the new generation handsets?
>> Is there more to this move than that meets the eye?

Well, none of the questions look irrelevant and an unfavorable answer to any of them can actually put Nokia in an awkward situation in the Indian market. So, the first question many may ask is, does Nokia need to bother much about the Indian market? The answer is ‘yes’. First let’s get into why India is important for the phone maker and then let’s take up the vital questions that have been triggered by the ‘don’t know how to describe it’ move.

What makes India important?
India is like a parallel universe for Nokia, where the market competition and situation is just opposite and thus all in Nokia’s favor. While in the US, Nokia is trying to feed on whatever is left after Apple (NASDAQ: AAPL), Samsung and Google are done eating, in India the phone maker enjoys an extremely strong position. In the second quarter of 2012, Apple’s iOS and Google’s Android together accounted for 85% of the smartphones shipped globally and Samsung represented 44% of all the Androids shipped. While Apple’s share was lower at just 17%, still it was much higher than Nokia’s 4.4%. Again, this 4.4% share was mainly driven by the now-defunct Symbian OS and not the Windows OS.

In contrast to all this, Nokia enjoys a market share of 36% in India while Apple is struggling at a mere 4%. It seems as if a role-reversal has taken place.  The Indian consumer electronics market sees Nokia as a strong and steady player with proven competency and one that has been around for a substantially long time and this automatically increases the faith on the brand. Though the 36% market share is hugely due to the popularity of feature phones from Nokia, even its high end phones are doing relatively well. At present Nokia is the leader in low-end phones in India and with time as the purchasing and consumption power of the average Indian increases, Nokia may be able to convert many of these feature phone users to its smartphone users and thus improve its margins in the country. Presently, the Asha series is doing very well and chances are high that in the future the Asha users will move to Lumia, than to an iPhone. Until that time comes, Nokia can maintain the brand loyalty by offering the comparatively low-margin Asha devices to the users.

Another factor that makes India important is the pricing dynamics. The prices of handsets on a comparative basis are much higher in India. For example, the Lumia 900, which is currently available in the US for $400 in the AT&T store when purchased without a contract, will cost INR 33,000 which when converted comes to roughly $620. So, you can imagine how much more it can earn from each device sold.

Now that I have outlined why I feel India is important for Nokia, let’s move on to the second part of today’s topic.

Discussing Nokia’s move and the questions
In the first quarter of 2012 Nokia sold a total of 2 million Lumia handsets and the second quarter the figure doubled at 4 million units. So, Nokia was able to sell just 6 million units in the first half of the year mainly because it focused on US and select European countries only. The phone maker made a big mistake by ignoring a few markets such as India, China and the Middle East. Had the phone maker introduced the device to these markets, the sales volume would have been much higher. And now, after almost seven months since its launch, Nokia launched the Lumia 900 in India, accompanies by heavy promotions.

But, this move is probably too late. The WP8 powered phones from Nokia are just a month away and obviously no one will be interested to buy the back-dated Lumia device as it won’t be upgradable to WP8. Though, to many users the version of the OS will not matter much since more or less all the features in the WP7 have already been upgraded since the time it was launched, the majority will not like to spend as heavily as $620 and get a smartphone with an obsolete OS. At least Nokia should not underestimate the impact of an obsolete OS anymore since the same was the reason for the company’s downfall. The consumers started rejecting the Symbian OS and the shipments dropped. Nokia will be lucky even if a small fraction of the market decides to buy the Lumia 900.

Again, at least Nokia shouldn’t have ignored India. India is one of the few countries where Apple does not have much penetration and Nokia continues to enjoy a strong brand name. May be there is a difference between how Nokia actually looks at the Indian market and how it actually should look at it. After attempting to sell the device in US and few European countries, may be Nokia has realized that these markets won’t buy this device anymore and thus the company has now turned towards India to dump the remaining inventory and get over with the task of selling. Since the company managed to sell only 6 million units, the management will be glad if they can manage another one or two million in India.

Lastly, maybe there is more to the move than that meets the eye. Maybe a delayed launch of Lumia 900 in India also suggests that the Lumia 820 and the Lumia 920 will also face a delayed launch in the country. Surely, the company won’t want anyone to think in this way. But, a marketing blooper as huge as this can’t be hidden. Since the time Stephen Elop joined the company, the products have started looking much better but the marketing efforts have gone horribly wrong. Now, whether Nokia will be able to sell Lumia 900 in India or not will depend on when the company launches the Lumia 920. If the phone maker delays the launch of the new device, then maybe a few Lumia 900 will be seen in the streets. But, this again might prove to be fatal for the demand of Lumia 920. What I fail to understand is why Nokia keeps on delaying the launch of new phones in some markets when it clearly is in need of volumes.

Concluding thoughts
A move such as this can actually ruin Nokia’s reputation in the Indian market. The Indian consumers can get annoyed with Nokia’s attitude towards the market and its continuous attempts to sell old phones in the country. Obviously no one would like to be a second choice and mistakes such as these on Nokia’s part can hamper the current good prospects of Asha handsets also. How many Lumia 900 will be Finnish phone maker be able to sell can only be known once the company reports its earnings for the quarter. I feel, the company should stop trying to make money from the old devices and should launch the latest WP8 powered devices on time in all the markets. They can keep both the devices available and reduce the price of Lumia 900. The latest platform from Microsoft is going to give Nokia a second chance to get into the race and the company should use it wisely.

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