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September 08, 2009

Nokia Prices Netbook out of the U.S. Market

By Doug Mohney, Contributing Editor

Last week, Nokia (News - Alert) formally announced pricing on its shiny new netbook, the Booklet 3G. At a list price of 575 euros or around $820 in Yankee dollars, company executives have proven that they don't "get it" when it comes to pricing in the U.S. market.

U.S. 3G carriers are currently offering netbooks for anywhere from $99 (Sprint (News - Alert)) to $199 (Verizon, AT&T) with a two year contract. When you crunch the numbers, broadband service providers are willing to "underwrite" around $200 to $300 (list price) on a netbook offering, making up the difference on the contract fee.
If the same practice is applied to the Nokia Booklet 3G, a U.S. carrier (i.e. either T-Mobile (News - Alert) or AT&T, since the device is offered with integrated HSPA, not EVDO) is likely to offer the device for around $400 to $500 with a two year service contract. That's a lot of money for any IT shop to cough up, especially when you start talking large quantities.

Individual "elite" users who love Nokia hardware and specialty verticals who really, really need the integrated GPS functionality will likely pay the premium, but a lot of people are going to take a pass.
Given the current pricing on full-featured notebooks these days, a carrier could subsidize a 3G-enabled notebook and handily beat the pricing for a subsidized Nokia netbook. Or carriers could simply offer a "buy one, get one free" netbook offer with another brand since the list price for a notebook runs between $350 to $450 – roughly half the price of a single Nokia Booklet 3G.
No matter how you slice it, the Nokia Booklet 3G price is just too high when compared to the many alternatives available to both carriers and consumers who go a la carte. If Nokia wants to gain market share in the U.S., it will have to figure out a way to adjust its prices downward. It doesn't have play the "match or beat" pricing game since the Booklet 3G has a couple of features (GPS, 12 hour battery life) that place it above the rest of the competition, but being nearly twice as much as everyone else in the market just doesn't work.

Given Nokia's brand name, pricing the Booklet 3G closer to a list price of $550 to $600 would make it much more attractive for the U.S. market.

Doug Mohney is a contributing editor for TMCnet and a 20-year veteran of the ICT space. To read more of his articles, please visit columnist page.

Edited by Patrick Barnard

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