Nokia's No. 1 market position threatened by price-cutting competitors
The cell phone giant Nokia shocked the European and US financial markets with the announcement that its Q3 market share would reduce significantly. The company blamed this downturn on several factors including a decision not to compete on price with its major competitors and the slower-than-expected ramp-up of a mid-range device.
The UK division of Nokia accused Samsung and Sony Ericsson of aggressively cutting their prices simply to gain market share. The company's MD, Simon Ainslie, said that this level of pricing couldn't sustain a business, and pointed to a similar attempt several years ago by Motorola that ended in failure.
Samsung and Sony Ericsson have both targeted Nokia's prepay heartland with low-cost and mid-range handsets, and have gained share as a result, bringing them within three to five per cent of Nokia's No. 1 market position. Some operators, notably Orange, have reduced the number of Nokia handsets on offer, while O2 recently turned down the chance to resell the new N96 smartphone.
Despite this gloomy picture Nokia remains upbeat. The company maintains it is still targeting an increase in its device market share in 2008, and still expecting industry mobile device volumes to grow 10 percent or more from the approximately 1.14 billion units it estimated for 2007.