Should New Lumia Devices be sold at a loss ?

[a5cent]

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.

Has absolutely nothing to do with shareholder discussions. Software and hardware engineering are major contributing factors to the cost of each device. Smartphone OSes and hardware designs don't just pop into existence out of thin air. That costs hundreds of millions each quarter. Such investments must be made if you want a product to sell. If you're only calculating the material and assembly costs, you're not calculating the true cost at all.

 

[Feoray]

Either they price their phones the same or lower to the new Nexus phones or they should just leave the market. It really is quite simple. Only a fool would pay more for an inferior app experience.

 

[Aquila]

Is the goal of the sale to get users to use Microsoft's services or to sell a device? My guess based on your argument is that they would be best served to get people into the ecosystem with cost effective solutions - however there is a danger of precedent, and Google felt this with the Nexus line: Once you offer a fantastic product at a super-reduced price, people are not very charitable when you turn around a generation or two later and provide a fantastic product at a normal price. It may be wiser to market the product at full price (as far as MSRP) and entice users either with sales, and/or with associated products (discounts on Office 365, free OneDrive storage, etc, etc). If they are able to provide a great product at a modest or normal price and use other incentives to make that transaction into a great value for the consumer, that might be more of a win-win scenario than bottoming out their MSRP potentially for future generations by doing so with this one.

 

[Aquila]

Hopefully most of the sunk costs that you are referencing are in two places:

1. Already in the price of the Nokia sale as R&D that was completed prior to or during the sale.
2. Already (mostly) in the software development of Windows 10, independent of the Mobile division.

I'd hope that they are not baking from scratch to release two devices and that the real cost of the device is much closer to the BOM+R&D than to the full mobile division loss divided by the 8 or so million devices shipped each quarter.

Another good point already made, the ecosystem needs to be there once you hook someone on price - or they're going to jump off the next time someone else has a sale.

 

[anon(9668900)]

Markets all around the world are different. For example, in India many people are still buying their first or second smartphones, and it's all about price-vs-spec-sheet. I don't think Microsoft is going to win the battle against Xiaomi, OnePlus, Huaweii, and so on, unless they can price the 950 at least similar to where they went with the 830. Anything above ₹30,000 and the stock will just sit in the shop for months, unsold. I think the ideal prices in India will be ₹26,000 and ₹30,000 for Lumia 950 and 950 XL [~260 and 300 GBP, 400 and 450 USD], and even that seems a little high, but at least the 950 will see the light of the day in that case.

 

[Manmikey]

There is no easy answer to this but some thoughts.....
Amazon got pricing badly, badly wrong with its fire phone and I worry Ms will make the same mistake with the 950 and 950XL it deserves a premium price as it's internals are premium but most everyday people with their LGs, Samsung Galaxy's and iPhones are not going to consider a Lumia at those premium prices and it's those people that are needed to grow W10M.

If Ms undercut other flagships then the perception could be that it is "only" a mid range device especially as it is not metal

If you look at the original surface and surface RT they seemed really expensive for what they were but now with the 3rd generation we have apple and Google copying it! who'd have thought it!
Maybe this is where microsoft wants to be with its phones, I can't help thinking the 950's are an interim stop gap to keep the enthusiasts happy until it can get its surface phone on the market. If this is the case then it will be a premium price as most of us who are considering buying one would pay the premium price.

 

[Aquila]

Maybe this is where microsoft wants to be with its phones, I can't help thinking the 950's are an interim stop gap to keep the enthusiasts happy until it can get its surface phone on the market. If this is the case then it will be a premium price as most of us who are considering buying one would pay the premium price.

That's a good point. If they can control their inventory levels to just stay ahead of demand, then waste is reduced - but so are profits, as you have production costs divided by a smaller number of sales for all of the sunk costs.

 

[rory753]

Microsoft is bundling their services with their hardware to make people interested. what if they bundled a seriously discounted skype service with their unlocked phones? for instance, you could buy an unlocked lumia, but be able to use the skype wifi system to make unlimited calls to land lines and unlimited text. imagine a phone you could buy where you wouldn't need a carrier. what would you pay for that?

 

[Laura Knotek]

Microsoft is bundling their services with their hardware to make people interested. what if they bundled a seriously discounted skype service with their unlocked phones? for instance, you could buy an unlocked lumia, but be able to use the skype wifi system to make unlimited calls to land lines and unlimited text. imagine a phone you could buy where you wouldn't need a carrier. what would you pay for that?

That would be useful to some users, but others would not get any benefit from it. None of my family or friends use Skype.

 

[Murani Lewis]

I would absolutely not sell at a loss. The flagship phones can be sold to those who want the best the platform has to offer and pay the appropriate premium. Microsoft can easily turn a good profit if they give the core users the premium experience enthusiasts want.

 

[tgp]

for instance, you could buy an unlocked lumia, but be able to use the skype wifi system to make unlimited calls to land lines and unlimited text.

You can already do that, totally free, with Google Hangouts.

imagine a phone you could buy where you wouldn't need a carrier. what would you pay for that?

You would still need a carrier for the Internet access.

 

[Jazmac]

Selling at a loss will push the manufacturers to use cheaper materials which leads to poor products. In most cases.

Exactly my point.
Have ya been to a Wal-mart lately? They have become the largest brick and mortar store in most neighborhoods boxing out almost all competition based on price. If you think that's good for you, just look at the quality of the stuff they sell in that store. yes its name brand, but almost all of what they sell has a different sku number and or model number for the same product in another store. What that means is, they have been pushed manufacturers to lower standards in their products in order to sell there. Which is one reason Apple stuff has a premium price. Selling at a loss for Microsoft would be a major loss for everyone.

 

[jabtano]

Well I just took a good look at the LG v10 I was thinking looking at omit and then the 950XL I understand what is inside the new Lumia but when I look at them and the the the new LG and the new Samsung galaxy line , device wise boy if the 950s are priced the only people buying them will be us. And from the sound of it even our WP gang here are decided over them.them of course we have to see how the exclusives go. Bottom line against what is out there now the 950 line isn't going to catch anyone's eye

 

[Spicymikey]

No. It won't help. No one with an iPhone or Android who is invested with apps and user experience is going to drop it unless the alternative was going to deliver more in terms of features. Right now, Windows offers less in terms of 3rd party apps and function. A lot less really. So they could give the phones away and it wouldn't help enough. Spend the money on enticing third party developers to build for the platform, or accelerate the project to port Android apps to the Windows store. THAT will make a difference in the long run

 

[3earnhardt3]

I don't want a phone that is sold at a loss, it is not a viable long-term strategy and will only further dilute the value of Microsoft's platform. There is practically no revenue source for a windows phone post-sale. No one spends the $300 worth of apps required to make back the initial profit loss. Game consoles can be sold at a loss because of the $10 per game platform fee, which adds up quick. I can't think of one other mainstream electronic that is viable when sold at a loss.

 

[Devan Hammack]

god, get over the whole "3rd rebuild in x years" thing. we know why.. we see what the goal is and that there is not going to be another rebuild now that everything is together in one base.
Its starting to read like self pity, and thats so pathetic

 

[diktea]

IMHO, these does not stand out. they are too safe on the spec and are like any other mid-high end phones (in the same spec segment these lumias will be the last choice for neutral consumers)

Let them have some defining features for flagship (Not these two..) why cant they make another flagship with 40mp Camera or 4000-5000 mah battery with SD 820 or whatever or even skylake m processors. These 950/950xl can go at the same price as the others.. but flagship of MS should have a defining character which people have to notice.

For instance, L1020 was so so special because of the camera (though slow). it stands out among the rest. Microsoft can do that very well what is holding them back may be bigger problem that I failed to see.. anyway without some specially defining spec or feature its a loss against other OS

 

[marpamcy]

A "cheaper" phone is immediately the worst between two phones for the usual buyer. A seller will have a point to propose "..but for $50 more you get this android phone".
Better keep normal prices but offer $50 gift apps from the store. A buyer is more concern of the apps he has to buy again when moving to a new platform.

 

[Grant Hildyard]

Apple are giving away 2yrs of apple music here in australia with some new phones. I would say, throw in groove music pass with each phone, and xbox live, or the choice of both. Give the user the choice. Price it aggressively 10-20% below equivalent android products and have awesome start screen setups, not the crappy standard ones, as people have said here, a good start screen wows android and apple users. Also offer incentives to the sales people in the carrier shops, these are the people that drive what many users buy, be it a free ms office for 5 phones sold per month, xbox if they sell 50 phones a month, a surface if they sell 100 phones in a month etc etc. The sales people are the key, these sales people are going to get something out of selling them, these handsets will fly off the shelf. They need to make the choice compelling for the sales person and the end user.

 

[muvig]

sell at cost price