It's still alive and kicking
Nokia’s mobile phone share in developed markets has declined consistently from around 30% in 2005 to around 26.7% in 2009. [1] This decline can be attributed to Nokia’s inability to attract U.S. consumers, a delay in its Symbian operating system launch and its strained position in the competitive smartphone market versus more established players like Research in Motion, Apple and new emerging players like Google.
We expect Nokia’s negative share trend to continue in the future. However, a change in business strategy involving better product and marketing initiatives for Ovi, Nokia’s equivalent of Apple’s iTunes and App Store, could slow the company’s market share decline.
We currently have a Trefis price estimate of $12.33 for Nokia’s stock, about 16% above the current market price of $10.60.
Among Nokia’s competitors, Apple, RIM, and Motorola have earned significant brand equity over the past few years while Nokia’s smartphone market share dipped from around 52% in 2007 to 40% in 2009. [2] However, recent data released by iSuppli showed an encouraging uptick in Nokia’s global smartphone shipments market share from 38.5% in Q1 to 39.7% in Q2 while Apple and RIM’s market share decreased, perhaps signaling a shift in its fortunes. [3]
To complement Nokia’s smartphone push, we believe Ovi might provide fresh life to Nokia and could plug the slide in market share if it takes off. Ovi gives consumers online access to gaming, music, navigation, and other apps, similar to Apple’s App Store. We believe that Ovi signals a shift in Nokia’s strategy from being primarily a handset manufacturer to a company offering various entertainment services under one platform, a page out of Apple’s playbook.
With newer smartphones and more services available, two growing requirements for today’s developed market users, Nokia could turn around its developed market share.
The average of Trefis member forecasts for market share in developed markets indicates a decrease from 26.1% in 2010 to 23.4% by 2016, compared to the baseline Trefis estimate of a decrease from 25.7 % in 2010 to 19.7 % by the end of the Trefis forecast period. The member estimates imply an upside of 2% to the Trefis price estimate for Nokia’s stock.
You can drag the forecast trend line above to express your own views.
Our complete analysis for Nokia’s stock is here.
Notes:
1. Nokia’s Share of Developed Markets is calculated as: Nokia Unit Volume/Industry Unit Volume. Nokia provides industry unit volume and Nokia unit volume data by geography in its annual 20-F filings. We aggregated that information into Developed Markets (North America and Europe) and Emerging Markets (China, Latin America, the Middle East, Africa, and Asia Pacific).
3. iSuppli Press Release, October 12, 2010
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