The past week has been encouraging for Nokia (NOK), amid some positive reports; the stock has gained about 6% in the last five days. Nokia has been making slow progress since the start of the year - improving Lumia sales and impressive performance by Nokia Siemens have restored investor confidence. There has been more positive news about the company. According to AdDuplex, Nokia is the most popular Windows phone in the world. These reports have proven that Microsoft (MSFT) needs Nokia as much as Nokia needs Microsoft.
These reports quell fears about Nokia and Microsoft coming in direct competition in the smartphones market. At the same time, these reports indicate that Nokia Lumia is becoming an increasingly popular handset all over the world. In addition to these reports about Lumia's popularity, there have been other encouraging developments, which I will discuss in the following paragraphs.
Nokia Taking Back its Market Share in the Developing Economies
In my first article about Nokia, I emphasized that the company should put more focus towards developing economies - China, India and Africa are some of the biggest markets for the company. Recently, Nokia has faced some competition from Samsung (OTC:SSNLF) and HTC in India and China. As a result, Nokia lost its top spot to Samsung. However, these facts and figures were before the company launched its line of cheap smartphones in the region. As I stated in my previous article, the company has a far stronger brand image in China and India compared with Samsung and HTC, and it will help the company regain its market share.
Customers in these countries are price sensitive, and low-end handsets have received vast attention from customers in India and China. Flipkart, India's equivalent of Amazon (AMZN), has already exhausted its stock of Lumia 520. Nokia's cheaper handsets are taking a substantial market share from Cheaper Android mobile phones. AdDuplex report also suggests that Lumias are becoming increasingly popular in the U.S. Moreover, Lumia 520 has also been launched in the U.K., and the handset is available for £99 (U.S.$129.729). O2 is offering the phone for £119 on pre-pay, and Carphone is charging £99.95. These handsets are expected to grab a substantial chunk of low-end market inside the U.K. as well.
Conquering the North American Markets and Improving Margins
In my previous article, I spotted an interesting trend in Lumia sales from North America - despite lower sales volume, the company was able to bring in more revenue, indicating that more high-end handsets were sold. North American markets were said to be the biggest challenge for the company as Apple (AAPL) and Samsung divide most of the smartphones market between themselves. However, recent AdDuplex study as well as sales trend in the past six months indicates that the company is not facing much trouble in selling its high-end Lumias.
At the Mobile World Congress, Nokia's head of marketing, Vesa Jutila claimed that the company is looking to get over 10% of global smartphones market share by the end of 2013. At the end of the last year, Nokia's market share stood at 4.9% in the global smartphones industry. Nokia's strategy is spot on at the moment. The company is pushing cheaper smartphones in the developing economies where price sensitive consumers are buying Nokia devices like hot cakes. On the other hand, high-end Lumia devices are being received well in North America and Europe - high-end Lumias will considerably improve the margins of the company due to high ASPs. An important factor in improving sales is the uninterrupted supply. The company looks to have solved its supply issues, and the handsets are now reaching the market without any hitch. If the company is able to continue the current trend in sales, then we will see substantial improvement in earnings and margins, and Nokia will also achieve its target of over 10% of global smartphones market share.
The smartphones market is becoming increasingly competitive and interesting at the same time. Nokia has always been a global player in the mobile phones market, which gives it an edge over some of its competitors. The company has been providing mobile phones for almost every income bracket, which has given it probably the most diverse user base among the smartphone manufacturers. Nokia's recovery looks to be gathering pace now, and the next earnings announcement will be extremely important for the company. I believe Nokia will report better-than-expected results, and the stock will make a substantial upward move.