Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Director for the Platform and Technology Development Peter Wang said during an interview with Chinese media that profit margins on the top-of-the-line Nokia Lumia smartphones are the same as the $26 feature phone Nokia 105. Price difference between the two handsets is huge – Nokia 105 comes in at $26 while a Lumia 920 can put you back $499, but they yield the same margin rates.
Mr. Wang noted that most of the Chinese feature phone makers have adopted to build Android smartphones, giving Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) a wider space to operate in ultra-cheap feature phone space. Citing internal calculations, Wang said that manufacturers can’t produce Android smartphones for less than $50.
Analysts believe that Nokia 105 feature phones are equipped with a variant of Symbian OS, which has extremely low-end hardware requirements. So, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) can easily lower manufacturing costs. The 100-series feature phones still contribute to a large portion of the company’s sales. Wang said there are still 2.7 billion people in the world who don’t own a mobile phone. Nokia plans to entice those people to buy its devices.
Though Mr. Wang didn’t reveal the profit margin for Lumia smartphones, his statements indicate that Lumia margins are so low that they can be compared to a feature phone. Maybe Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) wants to get its devices in the hands of more users and make up for the low margin rates.
Most importantly, the cost of a Windows Phone operating system is also factored into the profit margin of each Lumia smartphone. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) charges a license fee on every Windows Phone device sold. The struggling mobile phone maker is in the midst of a turnaround. The company announced its first quarter earnings last week. Though earnings fell short of Wall Street estimates, net losses narrowed to just $150 million. Decreased losses were mainly due to the strong sales of its Lumia lineup of smartphones and massive restructuring.
Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will hold a Lumia event in London on May 14 where it is expected to unveil new devices. Nokia shares were down 0.61 percent to $3.28 at 12:28 PM EDT.
