Nokia Enters the Already Crowded Netbook Market: Pros and Cons

Nokia Corp. (NOK) Tuesday announced its sales and distribution plan for its first netbook called “Booklet 3G”. The U.S. retailer Best Buy Co. Inc. (BBY) will sell this netbook (mini laptop) for $299.99 together with AT&T’s (T) 3G data plan of $60 per month for a two-year contract. Also, a carrier-free unsubsidized option will be available for a price of $599. Booklet 3G will be available from mid-November. The pros and cons of Nokia’s new venture are as under:

Pros

(1) Diversification outside the mobile phone market becomes essential for Nokia. In recent times, the company has lost some ground due to fierce competition. According to Gartner Inc, Nokia’s share has fallen to 45% in the second quarter from 47.5% in the year-ago quarter. Meanwhile, market share of Research In Motion (RIMM) increased to 18.7% from 17.3% in the year-ago quarter and that of Apple Inc. (AAPL) soared to 13.3% from a mere 2.8% in the prior-year quarter.

(2) A business venture in the consumer PC/laptop market is a logical move on the part of Nokia towards the broader mobile computing market. The company is the global leader in the ordinary mobile phone market and has significantly penetrated the high-end smart-phone market. Last July, Nokia had unveiled a new handheld converged mobile computing device Called “N900” on Linux-based Maeme 5 software.

(3) Booklet 3G will have some unique features. This device will run on Microsoft Corp.’s (MSFT) new Windows 7 operating system together with Intel Corp.’s (INTC) innovative Atom chipset. Booklet 3G is built on expensive aluminum chassis with a high-definition screen and 12-houres battery back-up. This will also support 3G wireless connectivity together with GPS and WiFi functionality.

Cons

(1) The PC/laptop market is highly competitive. Large companies like Apple Inc. (AAPL), Dell Inc. (DELL), and Hewlett-Packard Co. (HPQ) are established players in the global notebook (laptop) market. Their notebooks are currently available at around $250 -$300 whereas Nokia has a price tag of approximately $300 for its net-book. This may be counterproductive to establish a strong foothold in the market. Earlier, smart-phone maker Palm Inc. (PALM) had failed in its venture in the net-book market.

(2) Even in the specific netbook market, Nokia is a late entrant. For the last two years, this market has been extensively catered to by low-cost producers like Lenovo, Acer, and Asus Tek. Their netbooks are available around $150, half the price of Nokia’s. The company possibly needs some subsidy in the form of cheaper data plan from its carrier partner AT&T.

(3) As the wireless pocket digital assistance market is evolving quickly throughout the world, we are not certain how long the netbooks will enjoy consumers’ preferences. With the advent of the super-fast 4G LTE (Long Term Evolution) technology, several mobile phone giants have already started developing LTE-compatible smart-phones. These smart-phones with some innovative technical features may resemble a personal computer like experience to its users and become a major competitor to the netbooks.

Comments

[Marc Gerstein:]

"Nokia has a price tag of approximately $300 for its net-book."

Wrong!

Nokia has a price tag of approximately $600 for its net-book, which is way overpriced.

Who in their right mind would take the $300 version which requires a $60-a-month plan with AT&T? Most people are already paying somebody somewhere for internet access and wouldn't even consider giving AT&T $60 a month.

This sort of nonsense is an example of what happens when corporations pay more attention to their own "biz dev" (business development) group rather than to their customers.

And by the way, who wants Windows 7, another Microsoft operating system of the future. One of the benefits of netbooks is that you can get them with XP, which we know works even on normal amounts of memory.

Oct 15 05:46 PM

[automaticeye:]

Agreed with the comments from Marc G. Nokia just throwing a turd against the wall. The turd smells very bad, will lose money, and be discontinued in the next year.

Oct 15 07:18 PM

[Takayama:]

Nokia is well known for expensive products with little to offer over its rivals, in my opinion. I often have problem identifying the selling points of their products. Most times, one key desirable feature is missing from the model you intend to own. In order for them to succeed, Nokia has only one choice. That is, lower its equipment price to win market share. Even the industrious Japanese is not gaining a foothold in net-books and smart-phones.

Oct 16 08:37 AM

[Alok Swain:]

Agree with all the comments above.

Would like to add something more.

In India Nokia has succeeded in gaining substancial market share because it came up with innovative cell phones that are attuned to Indian Environment (dusty) and rugged and very cheap (less than $100). It won there because it was so cheap that people with very low income could afford it and the cell phone plans from companies like Airtel allow you to keep your cell phone number with minimal one time fee somwhere around $10 dollars and very low cost plans, that even Indian villagers with low per capita income of around $1500-$2000 dollars can afford it. The point being Nokia won by targetting a huge market with innovative & cheap products, and in the process became a major market leader.

This as many commentators have written above looks like its doomed from the start. It has all the bad charecteristics. Its late to the market. Its expensive. The bundled plan is very expensive. Why would anybody in their right mind buy it, when in Atlanta (where I live) I can buy Internet plans for $25 from Clear.

Oct 16 11:14 AM

[markfl:]

PC World comes down about where I do: Nokia just isn't cost competitive. Note that the netbook in PC World's quote below was introduced at Wal Mart for $299 and now sells for $249, but I've noticed them having trouble keeping the item in stock:

"It runs a Intel Atom 1.6GHz chip -- the same used in the market-leading Acer Aspire Ones -- and includes Wi-Fi, a 120GB hard drive, 1GB of RAM, and a 10.1? display. My Acer has all of that, and was $259 without any subsidy [no subsidy for the Nokia offering even for data plan subscribers]."
www.pcworld.com/articl...

Oct 16 12:07 PM

[Tom B:]

Agreed. Think Palm "Folio", but with a cr*ppier OS.


On Oct 15 07:18 PM automaticeye wrote:

> Agreed with the comments from Marc G. Nokia just throwing a turd
> against the wall. The turd smells very bad, will lose money, and
> be discontinued in the next year.

Oct 18 11:31 PM