Have Nokia and Microsoft Hit Smartphone Gold?
Peter is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If they haven’t hit gold then it looks like definitely silver if the latest bits of news are correct. The Lumia 800, introduced two months ago, has captured a significant portion of the new handset sales in China, Germany and Russia. Demand in the U.S. for the 900 is outstripping supply. While Microsoft (NASDAQ: MSFT) has not confirmed the statement made by the COO of the Greater China Region, Michael Van der Bel, who said that the Windows Phone had grabbed 7% of China’s smartphone market share in just two months, it does look like initial sales there are promising.
Even if that number is misleading, which it most likely is, Microsoft and Nokia (NYSE: NOK) may have turned the corner on their smartphone partnership.
Market Share While We Wait
The big issue for Windows Phones at this point is Windows 8. Both Nokia and Microsoft need to prove themselves in the market before Windows 8 ships this fall. It is also having an effect on sales as some people are definitely holding for the next generation devices.
In spite of that Kantar’s latest market share figures have Windows Phone incrementally attracting market share in a number of major markets. Through April 15, with just one week of the Lumia 900’s sales booked, U.S. market share increased 8.8% year over year. The chart combines total Windows Mobile plus Windows 7.5 market share to give an idea of total growth for the platform. In Germany Windows Phones now hold a solid 7.5% of the total market share of installed phones. These numbers are encouraging for a platform that is shipping a product between major revisions and pushing against two rival systems that few have any complaints with.
One of the real advantages Nokia and Microsoft have right now is the low system requirements for Windows Phone 7.5, allowing them to sell the phones at an extremely low price for a full-featured smartphone. The Lumia 900 can be had through Amazon for just $39.99 on AT&T (NYSE: T). The Samsung Focus 2 can be had for just $50 with a similar feature set though smaller screen than the Lumia.
The price point is extremely important at this phase of the lifecycle and with Apple unwilling or unable to overcome the technical hurdles to get onto China Mobile’s network, this has granted Windows an opportunity to gain traction in the biggest market in the world. The total mobile phone market in China just passed the 1 billion subscriber line. So many people in Southeast Asia will experience the internet for the first time on a mobile device, which is why pricing is so very important. This is a reason why so many producers are tripping over themselves to hit the 1000 RMB entry point to bring their users in.
Apple wants the premium market. They’ll keep it.
The question on everyone’s mind is what did Van der Bel mean by 7%? We’ll find out with next month’s sales figures.
The 7% Solution
Moreover, most of the discussion is centered on today or the next quarter. The smartphone market will grow 40% this year. Up until this point the Windows Phone platform has been missing its killer phone. While the Lumia 900 may not be it yet, it is a major step in that direction.
In the meantime Microsoft can console itself by reportedly making far more, like 2 to 5 times more, off of each Android sale than Google does. How long will it be before Microsoft and Nokia’s price advantage that comes from Windows Phone’s low processor overhead forces Android licensees, like Samsung, to abandon Android for Windows?
There’s no denying that Google’s (NASDAQ: GOOG) Android is the market leader for smartphone sales. Everything looks good for them right now. But Android as a market is fracturing and it is very possible for it to become unmanageable very quickly. They are like an inattentive parent who hasn’t noticed the kids doing home improvements with a chainsaw. Like iOS, Windows Metro UI is not customizable in feel. The order of the tiles can be changed but the look of the OS is its own.
The Metro UI will become standard across all of Microsoft’s devices and if the early reviews of the functionality of Windows Phone 7.5 are any indication, people who use it love it and want to champion it. With 35 million people already using Metro on their Xbox Live TVs the market has been seeded with Microsoft’s live tiles.
Microsoft is playing the long game with Windows 8 and building its ecosystem. Their social network, So.cl, which has been in gestation at various U.S. universities, is now live and taking applications. It is very basic at this point. For Microsoft Windows Phone is a means to monetize a market where Windows has market share but pirating saps their revenue. For Nokia they need a hit phone platform to replace the ashes of Symbian and to maintain their brand across the world.
PeterPham8 has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.