Why wireless carriers are discounting Windows Phones

Sales of Windows Phone are weak because of a shortage of apps, but carriers also need to move inventory to make room for a crush of new devices

What's going on with discounted prices for Windows Phone 8 smartphones like the recently launched Samsung ATIV S Neo and Nokia's Lumia 1020?

ATIV S Neo
Samsung's ATIV S Neo smartphone will be sold by AT&T as well as Sprint.

Carriers won't say much, but they seem to be clearing their shelves of excess smartphone stock that's getting stale by cutting prices for some Windows Phone 8 phones that have been on the market for barely two months.

In one example, AT&T on Thursday said it would begin selling the Samsung ATIV S Neo for $99.99 with a two-year contract starting Nov. 8. The 4.77-in. Neo will be AT&T's first Windows Phone 8 smartphone from Samsung and will run on the carrier's 4G LTE network.

At that price, the Neo has plenty going for it, but Sprint is now offering the same smartphone for half of AT&T's price, $49.99, plus a two-year contract.

What's more, the Neo first went on sale at Sprint on Aug. 16, when Sprint charged $149.99 with a two-year contract and a rebate. Sprint had already been selling the HTC 8XT, also with Windows Phone 8, in July for $99.99 with rebate and a two-year agreement.

Nokia is normally the big name associated with Windows Phone 8, making about 80% of such devices, including the Lumia 1020 with a 41-megapixel camera.

AT&T put the Lumia 1020 on sale exclusively in the U.S. for $299.99 and a two-year agreement in August. But now, AT&T is selling the Nokia Lumia 1020 for just $199.99 online.

AT&T will also be the exclusive U.S. carrier of the coming Nokia Lumia 1520 with its 6-in. display, also on Windows Phone 8, the carrier revealed earlier this week.

So, are the discounted prices really that significant -- possibly a sign of Windows Phone 8 weakness in the U.S.? Or are the discounts part of a wider pattern caused by having so many smartphones on various platforms with an array of new features hitting the market at the same time?

And why would AT&T begin selling the ATIV S Neo, weeks after rival Sprint did, when a phone's shelf life is considered to be so short?

The answers to these questions are somewhat obscure. To be sure, carriers constantly adjust prices for many smartphones -- especially the slower selling ones --as they recognize that new models, such as the iPhone 5S, will capture buyers' attention of buyers for just a few hurried weeks before year-end sales come to a close.

In such a crowded and fast-paced marketplace, Windows Phone 8 will suffer heavily because it has only 3.3% market share, according to research firm Gartner's numbers for the second quarter. Gartner placed Windows Phone 8 third behind phones running the Android mobile operating system and Apple's iOS, but ahead of BlackBerry for the first time.

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