Should New Lumia Devices be sold at a loss ?

[Mad Cabbie]

Personally, I don't think it's got a lot to do with price. Windows Phone has a stigma attached, somewhat wrongly. If the 950 was ?150, people would still buy the iBone of Samdung edge / edge plus, along with the plethora of devices that are basically the same. I would say for 60 - 70% of the mobile users, its about bragging rights, showing off and basically portraying an image. Networks love the fact that android has a new device every hour, and at the price they are. O2 in the UK, now offer a 'refresh' contract. Basically, everytime iBone or scamdroid has a new device available, mugs go into the shop and pay off the outstanding balance of their phone contract, Not there airtime contract. Bearing in mind they list the Galaxy Edge at just under ?700, you would think people would avoid them. Do they? Do they hell.

My brother works for O2, and the refresh contract is the biggest scam going, with people tying themselves in knots and debt, for a phone that allows them to portray a lie.

So, IMHO cut price phones won't work. In UK the 640, a very capable device, is ?100. Do you see them everywhere?? The 435, a great little device for your child at ?30, they should be everywhere, but they aren't. Strangely, the fab 640xl, is proving very, very popular at ?159. Great eh? But there is a snag!! Try finding a high street phone shop that stocks them. The only place you can get one is Argos!!!!

I think this is more than price, apps and stigma. How do you sell WP to the users of 'sexy' fashion accessories
The marketing needs to be reassessed, and it won't be easy

 

[justonlumia]

The 640 and XL are doing well due to their fantastic price, for the first time after 520 I am seeing WP devices outside more frequently. I even convinced 3 people to buy 640XL who wanted to buy Zenfone 2 and Moto G

 

[a5cent]

2 billions per year? Where did you get that info, kinda sounds unbelievable, you can verify that?

It's definitely not unbelievable. You're likely dramatically underestimating the effort required to engineer the software and hardware for these things. Google doesn't even develop hardware and they've also had quarters where they've invested $500 million into Android software development.

I doubt the losses for 2015 will be as high as they were for 2014, primarily because MS let a lot of folks from ex-Nokia go. I don't think that changes Spectrum's basic statement though. Unless WM suddenly becomes very popular and these devices sell in droves, they will likely be selling at a loss at any conceivable price.

Pricing these slightly below the iPhone is justified. For people who don't want to spend a lot of money on smartphones, there are other places to look than the high-end.

Most people won't even spend $400 or $300 on a smartphone. If you wanted to chase market share with these phones, they would have to be sold below their manufacturing costs, never mind engineering costs. That's not what these devices are for. No company can afford to chase market share with high-end phones. If that's what you're hoping for you're living in fantasy-land.

 

[Reebs Reebs]

this temporary spike might be the reason for major apps to adopt the platform and might have a cycle effect. you got to start somewhere... and maybe thats' the push needed to get the cart rolling.

 

[Krystianpants]

That comes out to about $50 loss per device. An interesting point about this number is that it is thought that Microsoft earns about $2 billion/year from Android royalties, the same amount as WP losses.

This is of course assuming that your number here is accurate.

Yet Windows phone users get angry that MS makes android/ios apps. They use this money to actually be able to work on windows 10 mobile and other projects and continue trying to get into the mobile market.

 

[jlzimmerman]

The only way MS is going to really move the 950 and 950 XL is to market the hell out of them. Market them well. Market them smartly. Show people why they should buy one and what it can do. If MS does their typical **** poor marketing it will sell as well as the Icon and 930, which will do nothing for marketshare and more importantly, developer interest. I pray to God that the pricing from the link below is false.
http://wmpoweruser.com/spanish-pricing-of-lumia-950-and-950-xl-revealed-and-its-not-pretty/

Yes, the iPhone 6 and 6S go for a ridiculous $749 and $649, but iOS is proven, has good reputation, and apps. If the 950XL and 950 go for more than $500/?330/€450 you can kiss sales goodbye. Nobody outside of current WP users are going open up their wallet and drop this kind of coin on an unknown phone with an iffy ecosystem by a company that is still trying to climb out of a bad reputation.

 

[Krystianpants]

It's definitely not unbelievable. You're likely dramatically underestimating the effort required to engineer the software and hardware for these things. Google doesn't even develop hardware and they've also had quarters where they've invested $500 million into Android software development.

I doubt the losses for 2015 will be as high as they were for 2014, primarily because MS let a lot of folks from ex-Nokia go. I don't think that changes Spectrum's basic statement though. Unless WM suddenly becomes very popular and these devices sell in droves, they will likely be selling at a loss at any conceivable price.

Pricing these slightly below the iPhone is justified. For people who don't want to spend a lot of money on smartphones, there are other places to look than the high-end.

Most people won't even spend $400 or $300 on a smartphone. If you wanted to chase market share with these phones, they would have to be sold below their manufacturing costs, never mind engineering costs. That's not what these devices are for. No company can afford to chase market share with high-end phones. If that's what you're hoping for you're living in fantasy-land.

While this is true. Sometimes I think of how the Surface line took off and as a result this caused a high spike of OEMs to start producing as they noticed the sales figures. Granted it took a few iterations to get it right for them. I would think they would try something similar with the phones. Not really about selling it at a low price, but simply making them more spectacular than anything else out there. And I imagine the next wave they are working on will be much better and these are there to keep the current fans from jumping ship. The fans who want high end specs on their platform. While I do think the design of the new high res leaks look nice, they are not what android/ios users are used to. And those complaining about the designs are almost sad because they just want to be able to show their android/ios fans that their phone looks better. We will see how things pan out with these phones. And of course if reviews on the phones are good on most major sites it could help drive sales. Unfortunately there is a lot of Apple bias among reviewers. Specifically non-tech news sites that also throw in tech stuff from time to time.

 

[Rose640]

It's definitely not unbelievable. You're likely dramatically underestimating the effort required to engineer the software and hardware for these things. Google doesn't even develop hardware and they've also had quarters where they've invested $500 million into Android software development.

I doubt the losses for 2015 will be as high as they were for 2014, primarily because MS let a lot of folks from ex-Nokia go. I don't think that changes Spectrum's basic statement though. Unless WM suddenly becomes very popular and these devices sell in droves, they will likely be selling at a loss at any conceivable price.

Pricing these slightly below the iPhone is justified. For people who don't want to spend a lot of money on smartphones, there are other places to look than the high-end.

Most people won't even spend $400 or $300 on a smartphone. If you wanted to chase market share with these phones, they would have to be sold below their manufacturing costs, never mind engineering costs. That's not what these devices are for. No company can afford to chase market share with high-end phones. If that's what you're hoping for you're living in fantasy-land.

I wasn't underestimating anything. Honestly i'm clueless about these stuff, numbers were never my thing. The reason i asked was simply cause i was wondering why would MS still continou making these phones, they're absolutely dominant on PC market.

 

[Krystianpants]

The only way MS is going to really move the 950 and 950 XL is to market the hell out of them. Market them well. Market them smartly. Show people why they should buy one and what it can do. If MS does their typical **** poor marketing it will sell as well as the Icon and 930, which will do nothing for marketshare and more importantly, developer interest. I pray to God that the pricing from the link below is false.
Spanish pricing of Lumia 950 and 950 XL revealed, and its not pretty - WMPoweruser

Yes, the iPhone 6 and 6S go for a ridiculous $749 and $649, but iOS is proven, has good reputation, and apps. If the 950XL and 950 go for more than $500/?330/€450 you can kiss sales goodbye. Nobody outside of current WP users are going open up their wallet and drop this kind of coin on an unknown phone with an iffy ecosystem by a company that is still trying to climb out of a bad reputation.

They did a really good job with the Windows 10 ads. I think MS really needs to show off the start screen. I actually showed an apple employee my start screen the other day and his words were "wow that's actually pretty cool". He just knows that plain start screen that MS sticks to with all their releases. they could make ads where they flash all kinds of different start screens they can have some artists create.

 

[Krystianpants]

I wasn't underestimating anything. Honestly i'm clueless about these stuff, numbers were never my thing. The reason i asked was simply cause i was wondering why would MS still continou making these phones, they're absolutely dominant on PC market.

They have great share in some places. Someone on reddit posted a thread about how they went to Italy and the amount of apps that they have is insane. They actually have most major services and everything for Italians. And that's because they have dominance over ios.

 

[ntice_521]

What do you think they've been doing? The 520/630/640/etc phones are as cheap, or cheaper, than any android phones of equivalent quality. The thing is, selling a lot of cheap phones doesn't help the app situation, because people who buy cheap phones don't buy apps. Apple's app store revenue is actually higher than Google's despite a much smaller market share.

 

[fdalbor]

Interesting charts; if they are accurate Windows does not look so bad. I own a midrange WP and a midrange Android phone. Each with they own number etc. I use the WP about 80% of the time and fine it meets my needs quite well. But both my tablets are Android and my computer is a HP Envy 23" touch screen all in one. Right now I don't know if I will or will not buy a 950/950XL. I've gotten along just fine with the mid-range phones and am not sure I need more phone when I have high end tablets and computer. But I will take a peek at them.

 

[jlzimmerman]

They did a really good job with the Windows 10 ads. I think MS really needs to show off the start screen. I actually showed an apple employee my start screen the other day and his words were "wow that's actually pretty cool". He just knows that plain start screen that MS sticks to with all their releases. they could make ads where they flash all kinds of different start screens they can have some artists create.

That would be one way to go about it, but they would really need to show various styles of the start screen to show how personalized it can be. I'll hold my breath and until they prove me wrong, I will expect something with just Cortana or an ad showing the same specs every other flagship phone has while some hyper brat taps his pencil and knucke-raps on a desk.

 

[mikepalma]

As a MS shareholder this is a ridiculous notion. Satya was hired to make the most for shareholders, not lose money to float a dying ecosystem.

The solution is complex, as different international venues have different demand for hardware. But, features and apps are priority and if the universal and porting thing doesn't work, the mobile tents will be folded up. No one will switch from an iPhone to save $100 for less features and bad and missing apps.

If mobile goes away, I will be happy with an iPhone w Cortana, Office and Outlook and Band 2 on my wrist

 

[erfanjafar]

Selling at zero profit or less means MS would remove any and all profit potential from the WP hardware market. This would make MS the scourge of the industry and draw the ire of companies who rely on smartphone profits to survive. By killing the profit potential in the WP market, MS would also turn away any OEMs currently thinking of releasing a WP device. I personally don't find engagement by other OEMs important, but many others here do.

If MS wants other OEMs to engage, they must take the exact opposite approach, by asking well above average prices.

I actually question whether MS is earning any money on these at all, even at $700. There is no set price at which a phone is guaranteed to make a profit, as it must first recoup the hundreds of millions MS invests in software and hardware engineering. That means the only way to make a profit is by selling high-end devices, with high margins, in large numbers... something high-end Lumias don't typically do.

Assuming these won't sell in large numbers, it's safe to say these devices are already losing MS money at almost any price. IMHO the question is not whether MS should be prepared to lose money, but how much?

I do think they must come in below the price of an iPhone, but expecting MS to go much lower isn't fair either.

Either way, chasing market share is not W10M's goal. Even if it was, it would be far more reasonable to do that with low end devices.

Agreed! But I personally want 950xl to be cheap so that I can buy it

 

[a5cent]

Agreed! But I personally want 950xl to be cheap so that I can buy it

lol. Obviously...

I suspect that desire is one of the most influential factors for those concluding that MS should sell at or below market value. ;-)

 

[mmcpher]

Top-end Apple Iphone 6S Plus with 128gb costs . . . . well I could buy three very nice Windows 10 Notebooks for the same $1,000.00. How much mark-up is built into the Apple? 'Reducing' the 950XL price below the Apple comparable would put it at $900.00. I would think Microsoft could cut a lot deeper before they'd be selling it at a loss. And can Microsoft come up with an answer to Apple's new mortgage payment system, where you pay nearly $50 a month just to get the phone, before being charged for its use?

 

[a5cent]

Top-end Apple Iphone 6S Plus with 128gb costs . . . . well I could buy three very nice Windows 10 Notebooks for the same $1,000.00. How much mark-up is built into the Apple? 'Reducing' the 950XL price below the Apple comparable would put it at $900.00. I would think Microsoft could cut a lot deeper before they'd be selling it at a loss.

As stated and explained in many of the earlier posts, MS would be selling this at a loss even at $900. They would even be selling at a loss at $1500. It really doesn't matter. They aren't making money on this. What matters is not the sales price, but sales volume, and that's where high-end lumias have always stumbled.

 

[ikissfutebol]

I don't think $100 is enough of a carrot. Most places are still financing for 24 months. $100/24 is about $2/mo different. I hardly think someone spending $25/mo to finance a phone is going to really care about a Windows Phone at $23.

The bigger deal is in ranges where numbers are being sold full price, no financing (low-mid range). If someone can get a midrange phone for cheaper than the crap they sell at the drug store or department store electronics section in a clamshell package, now you are talking. Let's be honest - if the major iOS/Android apps all come to Windows 10 with the compatibility in programming, maybe you have a few converts. The biggest room for growth are first time users. As a high school teacher, kids going from a feature phone to smart phone still all want the social status that is an iPhone. If MS can get continuum tech into a Lumia 6xx or 5xx and it truly removes the need for a laptop/desktop/tablet, you have a hit.

 

[mmcpher]

As stated and explained in many of the earlier posts, MS would be selling this at a loss even at $900. They would even be selling at a loss at $1500. It really doesn't matter. They aren't making money on this. What matters is not the sales price, but sales volume, and that's where high-end lumias have always stumbled.

This isn't a shareholder discussion board. I'm not talking about recouping all the phone segment sunk costs in R&D and fruitless former advertising, over-supply etc. I'm talking about how much it costs to manufacture and service each new device, versus the price to buy each device. If Microsoft was freighting the new devices with the burden of turning a massive, multi-year loss into a solid profit next year, they would price the 950Xl at $22,000 and then have to sell the hell out of them. If pricing is Apple-flavored, consumer appetite will be very low. Its been much discussed that the Lumias are not Surface branded phones. I hope Microsoft doesn't take the same tack that it did with the initial Surfaces. The counterweight to the Surface Pro 1's high price point was a deferred release and puny availability, so that economic disaster could be averted in the event the launch went bust-o. We had to wait for months and months for a very expensive device, with very expensive accessories.