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A quote from William Stofega, IDC's program director for mobile devices, should have observers of Microsoft s (NASDAQ:MSFT) Windows Phone and Nokia (NYSE:NOK) stand up and take notice. More than 5.4% of the smartphones sold in India in Q4 2012 were running Windows Phone. This is a significant improvement in a virtually untapped market. There were only 16.2 million smartphones sold in India in 2012, 5.4 million in Q4. But the year over year growth rate is more than 70% and with the sub $200 smartphone now a device far closer in functionality to the top-end phones, this growth is very likely to sustain itself.

And remember this folks, Apple (NASDAQ:AAPL) isn't playing directly in India.

Nokia's strategy of keeping itself relevant in India during the industry's transition to commodity smartphones by releasing its Asha phones is beginning to look better and better. While Windows Phone is, for all intents and purposes, still struggling to find an audience in the U.S. - though there are some signs that that is occurring - the numbers coming out of emerging (and developed) Europe and Asia are very encouraging. Microsoft's choice to install Yandex (NASDAQ:YNDX) as the default search engine on Russian Windows Phones is likely why Eastern Europe is seeing strong adoption. And India is a perfect market to transition users from $89 Ashas to $193 (Rs10,499) Lumia 520s, which are now available for pre-order.

Nokia still has a lot of brand cache in India and the sales figures there bear that out. Looking forward into the rest of 2013, however, is where I think we'll see very strong growth for Nokia and Windows Phone. The Lumia 520 and 720 are perfect devices for these markets, including China where they have also just been released, with TD-CDMA versions for China Mobile (CHM).

While I have little doubt about the growth of Windows Phone in the areas where it is currently doing well - a recent note about sales of the Lumia 620 in Thailand adds to the picture nicely - I am still worried about the situation in China. We still do not have good data which suggests that the Chinese consumer has fully embraced Windows Phone even with local producers Huawei and ZTE (OTCPK:ZTCOF) building phones for the OS. What will be interesting is when Lenovo (OTCPK:LNVGY) enters the Windows Phone market. Comments made by the company suggest strongly that once Windows Phone is well established in the enterprise space its superior security features will make it worth offering alongside the rest of its business-oriented product line.

The tale will be told with the Q1 sales figures as no amount of press manipulation will be able to cover up sluggish market share numbers. And yes, I say that knowing the Lumia 920 was only released in late January, so even then we still won't have full quarterly numbers with which to make projections. But, realistically, we've heard nothing from Microsoft recently about the situation in China. If things were going that well, it would be all over the press here.

That said, however, the fight in smartphones will be won at the low end of the market and Nokia's blend of style, durability and functionality is winning people over. The easy money has been made in the smart phone market and now the hard part starts. Customer loyalty has to be earned. Just ask HTC. By all accounts they have made an excellent phone with the 8x and yet the Lumia 920 outsells it. There will be a lot of fluidity in these markets and while Android may currently have more than 80% of the Indian smartphone market, with such low penetration that can shift quickly, as can users preferences.

The story on Windows Phone 8 is still one of a promising first act. Nokia's earnings in a couple of weeks will shed more light on what we can expect in the next one.

Source: Nokia's India Strategy Paying Off Perfectly