Nokia, Ericsson to hold pricing line
Cell phone buyers shouldn't look for any more deep discounts from major players in the industry, judging by comments from Nokia and Ericsson executives at a conference.
Speaking at the Adams, Harkness & Hill Summer Seminar, executives from both handset companies said they will forgo pricing moves that would gain them market share at the expense of profits.
"There was a lot of crazy pricing in the second quarter. A lot of our competitors were probably selling phones below profit," said William Seymour, investor relations manager at Nokia. "We will not take market share at the expense of profits," he said, reiterating what Chief Executive Jorma Ollila told analysts earlier this month.
A similar comment was made by Ericsson Vice President Gary Pinkham, who acknowledged that his company had cut prices in the second quarter to move out older inventory in anticipation of new technology changes.
Looking to the third quarter, Pinkham said, Ericsson's average selling prices should stabilize. But that doesn't mean that competitors won't be offering discounts.
"There is an oversupply (in the market)," he said, "I think we will begin to see some players exit (the market), but until that settles down, we will see some price pressures."
A big factor in those price pressures is the slowdown in upgrades, they said. Customers have not been upgrading their systems at the levels expected six to nine months ago, Pinkham said.
Cellular phone companies are also finding that their high-end phones with multiple functions are not selling as well as they had expected. With this in mind, several companies are planning to launch low-cost, simple, disposable phones later this year that they believe will appeal to a wider audience.