Are Price Cuts the ANSWER for Nokia’s Lumia?

Nokia (NYSE:NOK) has cut the price of its flagship smartphone in half just three months after its launch in an effort to bolster sales as rivals such as Apple (NASDAQ:AAPL) and Samsung continue to erode the smartphone maker’s market share.

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The cost of the Lumia 900 Windows phone has been reduced to $49.99 from $99 with a two-year agreement, Nokia spokesman Keith Nowak said on Sunday. The phone is sold at AT&T (NYSE:T) stores.

The price cut “is part of [Nokia’s] ongoing lifecycle management, which is jointly done between Nokia and carrier customers,” said Nowak, adding that such a price cut is not unusual at this time in a smartphone’s life cycle, once the hype surrounding a new release has died down, and noting that Samsung similarly cut the price of its Galaxy S II, which was launched before the Lumia 900.

Once the dominant figure in the mobile phone industry, Nokia was late to the smartphone game, and has also been losing market share in lower-end handsets. The Lumia 900 uses largely untried software from Microsoft (NASDAQ:MSFT), and so far sales have been slow for the device on which Nokia was pinning a lot of hopes. Sales took a further hit when Microsoft said current phones will be unable to run its new Windows 8 software, rendering them obsolete when the new mobile OS comes out in late summer or early fall.

Meanwhile, Apple (NASDAQ:AAPL) has been holding on to a large share of the high-end market with the iPhone, which is expected to capture more than 20 percent of the smartphone market this year, while smartphones built on Google’s (NASDAQ:GOOG) Android system are expected to comprise 61 percent of the global market in 2012, according to International Data Corp.

Nokia (NYSE:NOK), as a result of its competitors’ successes and its own missteps, has been struggling to stay afloat. The company is expected to post a loss in the handset business of 236 million euros when it reports second-quarter results this coming Thursday, up from 127 million euros in the first quarter, according to analysts polled by Reuters.

Shares of Nokia (NYSE:NOK) are trading Monday at $1.83. Nokia shares are down 66.97 percent in the last year, and over 93 percent since June 2007, when Apple (NASDAQ:AAPL) released the first iPhone.

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