Nokia Halves Price of Lumia 900 “Hero Phone”

The Lumia 900, Nokia’s flagship Windows Phone handset and AT&T’s “hero phone,” has had its U.S. price slashed by half, just three months after its release. As of Sunday, the Lumia 900 can be purchased for just $49.99 with a two-year contract through AT&T.

That’s an aggressive price cut for a flagship smartphone, particularly one newly launched. What’s the rationale for it? Nokia insists that the halving of the Lumia 900’s price is simply part of its standard smartphone life cycle. “This move is a normal strategy,” said a company spokesperson. “It allows a broader consumer base to buy this flagship device at a more accessible price.”

Perhaps, but clearly there are other things at work here as well.

Microsoft said last month that while the Lumia 900 is upgradable to Windows Phone 7.8, it does not support the company’s forthcoming Windows Phone 8 operating system, which is expected this fall. In other words, Microsoft has effectively declared the device obsolete. Windows Phone 7 is a solid OS, but the announcement that the Lumia 900 can’t run its successor has almost certainly slowed its sales.

And those sales weren’t so great to begin with. Though they seemed strong initially, recent analysis suggests sales have slowed significantly. Extrapolating from smartphone market data compiled by comScore and Nielsen last week, Asymco’s Horace Dediu figured that Nokia may have sold fewer than 350,000 Lumia 900s in the U.S. If that’s accurate, Nokia presumably has a sizable inventory of the device that it needs to get rid of while it still can. Halving the Lumia 900’s price is obviously a good way of doing that.

Nokia reports second-quarter earnings on Thursday, following an ugly financial decline that has left its shares trading at a 16-year low.