Analysts at Wells Fargo securities believe Nokia Corporation (ADR) (NYSE:NOK) will see lower profit margins due to handset discounting. Retailers are already discounting Nokia’s flagship Lumia 920 handset, which just came out last month.
At this point we don’t know if the carriers are absorbing the reductions in profit losses or if Nokia itself is taking the hit, but at least one analyst believes the discounts will create problems for Nokia’s bottom line.
Analyst Jennifer M. Fritzsche of Wells Fargo Securities issued a flash comment to investors today warning about the seasonal discounts for Lumia handsets. She said many retailers are already discounting Nokia Lumia 822 & 920 handsets for post-Christmas sales. For example Verizon Communications Inc. (NYSE:VZ) is offering Lumia 822 free with a two-year contract, while Amazon.com, Inc. (NASDAQ:AMZN) is selling Lumia 920 for $39 with a two-year contract with AT&T Inc. (NYSE:T).
Meanwhile AT&T Inc. (NYSE:T) continues to sell the handsets at $99 in its retail stores. That was the price it was introduced at when the phone launched in November. Also T-Mobile USA Inc. is giving away the Lumia 810 with new contracts.
Fritzsche said handset discounting is very common this time of the year, but nonetheless they expect it to cause profit margin issues for Nokia Corporation (NYSE:NOK). Also the company has had to lower prices in the U.S. in order to convince consumers to buy it.
As ValueWalk reported last month, Nokia Corporation (NYSE:NOK) is counting on the success of its Lumia’s handsets, which operate on Microsoft Corporation (NASDAQ:MSFT)’s Windows 8 platform. Nokia has experienced a number of financial setbacks in recent years.
Shares of Nokia Corporation (NYSE:NOK) dropped more than 2 percent in afternoon trades.