Smartphones Are King — Sorry, Nokia

Smartphones outsold feature phones for the first time last quarter

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Historically, there’s been room for the third place mobile OS to take a big chunk of the market. At one point in 2009, for example, third-place iOS had a 18% share. In March 2011, third place BlackBerry OS was at 16% world wide. If Windows Phone could climb to even a 10% share — bringing Nokia along for the ride — that would mean 30 million Lumias a quarter, a point at which Nokia starts looking a whole lot better.

However, when it comes to smartphones, “history” is too short to see trends. And in the past two years, we’ve seen the market dramatically shift, with Android completely dominating at nearly 80% of sales, iOS taking 13% and third place reduced to a minor 3.7%.

Even if BlackBerry is eliminated altogether and other contenders like Firefox OS fail to catch on with consumers, it’s entirely possible that Android and iOS will soak up the majority of the windfall, leaving Windows Phone — and Nokia — languishing near current levels.

That Android domination is a primary reason why many analysts questioned Nokia’s decision to go with Windows over Android in the first place. Nokia’s Stephen Elop explained to The Guardian that his company expected Samsung to dominate the Android smartphone market. Rather than compete directly and likely be marginalized in the Android space, Nokia wanted to be that vital third option to carriers in both platform and manufacturer.

The argument makes some sense, but it’s not enough to quell calls for Nokia to adopt Android if it wants to survive.

Personally, I think Nokia should stick it out with Windows Phone. Any switch at this point would reek of desperation/

Besides, no matter how you slice it, Nokia has a challenging future. While the Lumia/Windows Phone uptick is a good sign — at least in the short term — the declining market for feature phones doesn’t bode well for the company, even if it can squeeze bigger profit margins from the devices.

The 90% decrease in NOK share price since those glory days when it first won the crown as “world’s biggest cellphone maker” reflects just how big of an uphill climb the company is facing.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/08/smartphones-nokia/.

©2014 InvestorPlace Media, LLC

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