Now Hear This!

Nokia is reportedly lowering prices on its handsets, some by as much as 10%, as it looks to keep its massive lead in mobile device market share.

The company’s multimedia mobile phones began competing with the 3G iPhone in Q2, which, as we reported, sold a million handsets in its first retail weekend. While a million handsets in just a few days is nothing to scoff at, Nokia shipped 122 million mobile devices in Q2, up 21% year on year and up 6% sequentially. According to IDC data released today, that gave Nokia a 39.9% market share in the June quarter.

Nokia is playing a defensive offense here. Yeah, they will welcome any new customers they gain by lowering prices, but they are also looking to persuade current customers to stay loyal and not stray for the flashy new iPhone.

And while Wall Street isn’t liking the price slash, lowering Nokia’s stock, NOK, by 1.44% today to close at $27.32, it could help sales here in the United States where the economy is suffering and consumers are thinking twice before dropping a Benjamin or two for a phone.

The move also puts pressure on its less-comfortable competitors, like 8% market share Sony Ericsson and 9.2% market share Motorola, to keep their prices down, perhaps jeopardizing their already thin profit margins. Don’t be surprised if Sony Ericsson -- which just sustained another harsh quarter, with soft demand in Europe, increased price competition, and a product portfolio that did not meet expectations -- is soon forced out of the top five mobile phone market share rankings. Moto -- which eked out a profit in Q2 and is still grasping onto the third ranking spot in terms of mobile phone shipments -- has yet to name a new head for its mobile devices business, leaving the industry wondering when the handset business spin off will happen and if the brand will be around much longer.

According to IDC's Worldwide Mobile Phone Tracker, vendors shipped a total of 306 million units in Q2, an increase of 5.6% from the 289.7 million units shipped during the previous quarter and up 15.3% from the 265.4 million units shipped during Q2 2007.

What are your thoughts on the mobile phone market? Is it being hit by our near-recession economic state? Will the price cuts keep consumers buying Nokia or will they be wooed by the shiny news iPhone? And will Nokia’s move put a few more nails in Sony Ericsson’s and Moto’s coffins? Share your comments below.

--Suzanne Deffree, Managing Editor, News