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But Q1 results for both Nokia basic phones and smartphones fell from last year

A few years back, it was common to mainly see basic phones in everyone's hands with a few smartphones here and there. Today, all that has changed as new versions of iPhones, Blackberry's and Android-based smartphones are released. In fact, new studies have shown that 35 percent of U.S. adults own smartphones.

But not everyone is up-to-date in the smartphone world. Nokia recently announced that its basic phones generate greater operating profits than its smartphones.

According to Nokia business results, its smartphone operating profit margin dropped to 6.2 percent in the first quarter. First quarter results from last year were at 10.4 percent. While Nokia's basic phones generate better operating profits, the margin on these phones experienced a drop as well from 19.4 percent last year to 16.5 percent this year.

"These numbers show how behind Nokia smartphone margins are compared with its rivals," said IDC analyst Francisco Jeronimo. "Nokia has been tackling the decline of its smartphone market share by focusing on the mid-tier price points and price cuts, which has had a straight impact on margins and profits."

With the basic phones market share falling to Asian rivals and the smartphone market share eaten up by Apple, HTC and Samsung, Nokia has fallen way behind in the races. Nokia Chief Executive Stephen Elop hopes to change this by introducing new smartphones with Microsoft's Windows software, but these efforts might be too little too late, since they're not expected to release until later this year.

Analysts predict that Nokia will experience a sharp fall in second-quarter results. These earnings are expected to be reported on July 21.

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is this rea*@@ a surprise?
By inperfectdarkness on 7/19/2011 5:50:11 PM , Rating: 1
you sign a 2-year contract & they give you a flip-phone for free. you pay $150-200 for a smartphone.

carriers know that basic phones are CASH COWS. they have to be. they're not making a fortune on them, like they can (and are) with with dataplans.

think about it. how much is a basic phone worth anyways? $100? if that? if you factor in that cell phone plans with a contract are usually at least $10 higher per month; that's a $100 fee that the carrier covers--in exchange for $240 in return income.

phone makers know this. they subsequently charge higher margins on these basic phones, because they know that even still--the carriers will be making 100% return on investment for "buying" the phone for a contract subscriber.

on a related note, i've had my phone for 3 years on the same contract. at this point, i'm being RAPED by the carrier. there should be some kind of incentive that lowers your bill after the contract period ends--if you keep the same phone.

RE: is this rea*@@ a surprise?
By jeepga on 7/19/2011 6:05:54 PM , Rating: 2
on a related note, i've had my phone for 3 years on the same contract. at this point, i'm being RAPED by the carrier. there should be some kind of incentive that lowers your bill after the contract period ends--if you keep the same phone.

That's never going to happen. They want you on a contract and there's no reason for you to be on a contract if you don't have a new phone. Basically, you're paying extra for the ability to jump ship whenever you want.

RE: is this rea*@@ a surprise?
By DanNeely on 7/19/2011 7:04:59 PM , Rating: 2
tmobile offers a discount once your phone is 2 years old and the contract is over. ATT/VZW both see the current setup as encouraging you to get a new phone and reup your contract.

RE: is this rea*@@ a surprise?
By Etsp on 7/19/2011 7:30:10 PM , Rating: 2
I doubt a dumbphone is worth $100. I have a palm Pixi Plus that I bought for $50 brand-new no-contract from Newegg. Before that, I was using a $25 dumbphone. (Really, really dumb. No camera, no internet, no volume control) I'm loving this phone. For $50 without contract, I don't think it can be beat.

RE: is this rea*@@ a surprise?
By Samus on 7/20/2011 1:43:28 AM , Rating: 1
The only advantage a carrier has selling you a dumbphone is the lack of a subsidy they might dish out if you bought a smartphone.

It's not that they profit more from you buying a dumbphone, they just lose less.

They make it all back during the contract, especially in the circumstance you break the contract. T-mob is up to $200 now for smartphone contracts.

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