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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Penny_Money who wrote (801)	7/31/1998 12:10:00 PM
From: tero kuittinen	Read Replies (1) \| Respond to of 34857

I've been told some people are bored with this thread's focus on handsets... fine; let's talk about infrastructure. Nokia's network sales growth was 45%, which puts it way ahead of Lucent, Ericsson and Nortel. Over half of this company's stellar profit growth comes from network division. So it's legit to regard Nokia as the hottest infrastructure company in the world. I grind my teeth a little every time some American journalist writes about Nokia as "the Finnish mobile phone company" in that certain "well, isn't that cute" tone... this company is showing Lucent just how network business should be run. Nice moves, Daniel. But I doubt that a couple of turn-coats from Kuopio ordering Ericsson equipment will dent Nokia's prospects much. The summer shortages of 5100 may have given Ericsson some breathing room, but now that the biggest production ramp-ups are over, Nokia can squeeze everything it can get from third quarter. Second quarter really was logistically tough on Nokia as two major model production expansions were undergoing simultaneously. It should get smoother from now on. I'm just gonna risk putting some readers to sleep and carry on about the phone sets a little more. Penny, there really is no other explanation for Ericsson's and Motorola's simultaneous cave-ins than Nokia's blitzkrieg. Sony, Philips-Lucent and Siemens all reported disastrous handset numbers carefully hidden in their announcements. Financial Times estimated that entire profits of Philips' consumer electronics division were wiped out by handset losses. Sony saw 22% contraction in electronic goods sales. Siemens is executing desperate price cuts to move its cheaper models from shelves and piling up losses as a consequence. Now all these competitors were able to keep their heads barely above the water in the first half, because Nokia had two huge gaps in its product line. No new cheap models and no new expensive prestige models. Those gaps have already been plugged in a spectacular way. Nokia's competition was able to generate some sales by undercutting 6100. But how are they going to undercut 5100, which sells at 40% lower price than 6100? The latest "Telephone Magazine" reviewed the 5100 alongside with Motorola's brand new GSM model 540. 5100 had four lines of text in the display, Mot model had two. 5100 had 100% longer stand-by times. The weight of the phones was same. And the price difference? The new Motorola phone is 80% more expensive in some European markets. This was just one example: 5100 has been getting as good or better review scores as mid-range phones in all the European mobile phones magazines I've seen. And the competing models are costing 50%-100% more. How can you fight that? This was one of Nokia's master strokes this year. For too long, cheap models were merely old and obsolete mid-range models that were sold at deep discount 2-4 years after their launch. Nokia is challenging this old approach by packing its new cheapie model with all the latest display technology, games and superior battery performance. The new prestige model, 8810, is also designed to be above price competition. It costs about 1'000 US dollars and is positioned as the Lamborghini of cellular phones. You can't challenge a premium product like this by selling older phones at a discount. You can only do this by matching the cutting edge technology and design. Nokia was hounded for years about when it would hit back at Startac and bring out its own supercompact luxury model. The company chose to do it now - when Ericsson and Motorola are at their weakest. Deviously, Nokia designed the 8810 to be the anti-Startac. Startac is black - 8810 has a metal finish. Startac is boxy - 8810 has a fluid, organic design. Startac is based on the 1995 design platform and the expensive models look just like the cheap models - 8810 is so distinctive you can recognize the phone at 100 feet... I have. Nokia is inviting the consumers to make comparisons and this hits Motorola below the belt: Startac's biggest weakness is its tired, outdated design model. People who know they are paying way too much for a product want something with sexual aggresion, not warmed-over mid-nineties business chic. When your average executive strolls into a retail store he will instinctively realize that only one of the luxury models will torture his employees with envy and class hatred. I'd say it's a winning strategy. Tero