Nokia Enters Netbook Market

Nokia Corp. (NOK) yesterday 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.

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