Early this week, Nokia (NYSE:NOK) unveiled a cheaper smartphone based on Microsoft’s (NASDAQ:MSFT) Windows Phone operating system, although the market was disappointed with the price point. Nokia announced that its new Lumia 610 model would be priced at 189 euros ($250), excluding subsidies and taxes, when it goes on sale next quarter.  We believe that Nokia should have come out with an even lower smartphone price, as a number of low-cost Google (NASDAQ:GOOG) Android vendors such as Huawei and ZTE sell smartphones in $100 range. Our $6.50 price estimate for Nokia stock is about 20% above the current market price.
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Nokia Looks to Snatch Android’s Market Share
Nokia’s CEO, Stephen Elop, expressed his desire to compete with the Android ecosystem during a conference in Spain.  In addition to further reducing the prices for its Lumia line of smartphones, Nokia will have to capture the U.S. market, where it has struggled traditionally against Android and Apple.
Nokia Could Target Android’s Weakness
Android is an open source OS and faces fragmentation issues, and Nokia could target this weakness of Android’s ecosystem to capture some market share. Late Steve Jobs famously touched upon this fragmentation issue during Apple’s fiscal 2010 earnings conference call.  He pointed out:
Google loves to characterize Android as open, and iOS and iPhone as closed. We find this a bit disingenuous and clouding the real difference between our two approaches. The first thing most of us think about when we hear the work open is Windows which is available on a variety of devices. Unlike Windows, however, where most PC’s have the same user interface and run the same app, Android is very fragmented. Many Android OEMs, including the two largest, HTC and Motorola install proprietary user interfaces to differentiate themselves from the commodity Android experience. The users will have to figure it all out. Compare this with iPhone, where every handset works the same. Notes:
- Nokia expands Lumia experience to new price points and geographies, Press Release, February 27th, 2012 [↩]
- Nokia CEO takes aim at Android, CNet, February 29th, 2012 [↩]
- The NPD Group: Apple Leads Mobile Handsets in Q4 2011, but Android Attracts More First-Time Smartphone Buyers, February 6th, 2012 [↩]
- Apple fiscal year 2010 earnings conference call, SeekingAlpha, October 18th, 2011 [↩] [↩]