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

To: Jon Coert who wrote (1108)	10/26/1998 5:05:00 PM
From: tero kuittinen	Respond to of 34857

Yeah, I've been to a couple of stores as well. I pretended to be Russian to avoid skewing results... three out of three stores recommended Nokia. I have to admit that one of the clerks gushed about the upcoming Motorola TDMA Startac. I asked him whether the price premium can be justified in light of the inferior battery performance, clumsy user interface and outdated design features and that seemed to shut him up. Nevertheless I'm sensing some vestigial loyalty towards the Motorola brand in USA. Of course, this is what the Motorola pricing policy depends on. It's nice to see that Nokia has launched some new attack ads on the standby time issue. They are bringing out the 51xx series at around 100 dollars here just as Moronola and Ericsson launch their high-end models. What was fascinating in the Friday's results was the way the profit growth kept outpacing the sales growth. Nokia's 51xx line has faced some criticism for packing many high-end features into low-end models; the fear is that 51xx will cannibalize the sales of 61xx phones. However, since the margins kept rising in the third quarter it looks like money can be made with cheap models as well. So many components are shared by 61xx and 51xx that the volume savings must be considerable. What sunk Siemens this year in Europe was their strategy of introducing good but rather expensive models just as Nokia went after the largely untapped white trash consumer segment. We now have a similar situation in USA: Motorola is bringing out pricey upscale phones just as Nokia is going downmarket with 51xx. The old paradigm of introducing pricey phones and then selling them cheaply two years later when they have aged is over: I think consumers now demand quality from cheap models and something extraordinary from expensive models. The complete lack of advanced cheapo models is now the biggest headache for Motorola and Ericsson. Ericsson's sales volume grew by 50% last quarter - their sales still shrunk. It is ironclad evidence that even bargain basement prices are not helping sell low end models if their technology is old. So it's not that threatening to Nokia that Motorola is launching V-series in four months and Ericsson is launching something equivalent in 6-8 months... what matters is when they can respond to Nokia's new "Dell"-like pricing strategy. Since it looks like they did not anticipate this kind of shift that could take more than a year. Tero