I am a resident of the USA, specifically the state of California. This past April, my wife and I had the privilege of spending two wonderful weeks on vacation in Italy. During our time, we visited Rome, Positano, and Florence.
As a Nokia (NYSE:NOK) and Apple (NASDAQ:AAPL) long, I was very interested in garnering impressions of the fight between Nokia, Apple and Samsung (OTC:SSNLF) from a different perspective than what I commonly see here in the United States. Most of our traveling was done by train, specifically the relatively new Italo high-speed train (we hit speeds of 300 KPH -- approximately 180 MPH -- on the stretch between Rome and Naples). Since Italo offers free Wi-Fi as an onboard amenity, I had the opportunity to observe what people were using both on the train, as well as when walking the city streets themselves.
First of all, here are the hard numbers, from the latest Kantar report, which includes numbers for Italy. Have a look at those first, and then we will match them up with my anecdotal observations.
Here are my observations, by company. Please note that the main thrust of my comments will be related to Nokia. However, I will offer a couple of observations concerning Apple as well.
First of all, the number that really leaps out at me from the Kantar report is Android's 62.5% market share in Italy, up 14.1% from the prior year. I would not have thought it to be that high based on my anecdotal observations. Since I know Samsung to be by far the dominant player in the Android space, it was that name that I was looking for. Even without knowing the hard numbers at the time I took my trip, my first impression was that of being greatly impressed by the inroads Samsung has obviously made.
The larger screens Samsung offers are clearly proving useful to a certain demographic. For example, the proprietor of the Bed and Breakfast we stayed at in Rome was very clearly using his Samsung as an integral work tool. He took down our Italian phone numbers in case we needed to make contact, entered appointments and bookings into his calendar, and performed similar tasks all on his Samsung. As I watched him work, and as an iPhone 4 owner myself, I could not help but be impressed by the benefits of a larger screen, yet in a compact package.
I saw similar scenes repeated over and over again. On the train, I noticed several individuals using Samsung phones. The breakdown was basically older people likely similar to my B&B proprietor, who were using the device as a business and communication tool, and kids who clearly enjoyed the larger screen as a platform from which to play games.
In the Kantar report, Apple is shown as being one of the victims of Android's success. Their current market share in Italy is 19.9%, down 2.7% from the previous year.
Regardless of what Apple says about screen quality being their main driver, etc., my quick take was that they need to at least offer a phone-based device with a larger screen. While it is a little difficult to casually spot an iPhone 4 vs. iPhone 5 due to their similar looks, my impression is that of seeing several iPhone 4s, but not necessarily as many iPhone 5s. My take is that the situation in Italy is likely somewhat similar to what I have seen here in the U.S., namely that there is a subset of people who believe that there is not enough difference between the iPhone 4 and iPhone 5 for them to upgrade. If a larger screen is important, it is clear that people are migrating in the direction of Samsung.
Anecdotally, I had a long conversation about life in general with one merchant who spoke perfect English. During the conversation, we just happened to get on the subject of technology, including his dislike of Facebook. This man sells quite expensive products, including some that are custom-designed and one-of-a-kind, and therefore deals with high-end clientele. Purely coincidentally, in the course of our discussion on technology he proudly showed me his iPhone 4 and explained that he had not upgraded to the iPhone 5 at the specific suggestion of one of his clients, who had told him to wait instead for "something big" that would follow. Please note my caveat that this is purely anecdotal, but this was a sharp, capable, and extremely practical man, so I took his words with some weight.
The good news for Nokia in Italy? The market share of Windows rose five percent, from 5.9% to 10.9% this past year. Now, one will notice that Symbian's market share simultaneously cratered 14.2% so, from that standpoint, one would have to say that Nokia was a net loser over the year, likely with Android stealing some of their share. Nevertheless, I find the fact that Windows made solid progress to be encouraging.
Here are my two takeaways based on personal observations.
- Larger Screen - Similar to my comments with Apple, I came away with the conclusion that Nokia needs to offer something with at least a 5" screen. Unlike Apple, Nokia has already introduced multiple smartphone offerings with at least a 4.3" screen, including the Lumia 920 with its 4.5" screen. This is good. However, there seems to be some magic about the 5" screen size for people like our B&B proprietor, who essentially use the device as their computer. Also, I couldn't help to be impressed with the slimness of the Samsung products, how they worked a larger screen into a unit that was still relatively compact overall. Lastly, I am impressed by what Nokia has done in terms of their camera quality. However, I'm not sure it is the case that camera quality is the main driver for everyone. Keeping the end customer clearly in mind is paramount.
- Loyalty Program for Legacy Users - I couldn't help but notice the large number of 'legacy' Nokia phones I saw in use in Italy. I hate generalizations but I will engage in one now to some extent to make a point. It is my impression that many Europeans are not as hung up as perhaps the typical American as far as being desperate to keep up with the 'latest thing.' I would describe many as very 'practical,' coming from a philosophy of 'it's working just fine for my needs, why do I need to change?' However, in this base, there are many people who clearly are both familiar with and comfortable with Nokia. I would like to see Nokia consider some form of loyalty program where such users were upgraded to a more contemporary product at a very reasonable price, thereby keeping them in the fold as opposed to switching, likely to an Android product as the hard numbers appear to show is happening.
Now that I have shared my anecdotal thoughts and observations, together with relating these to published data, let me close with a couple of news updates.
First, the larger screen size I suggest above may already be in the works. Mobile Today, a U.K. publication, is reporting that a Nokia "phablet" device featuring a 6" screen is due to be launched in the 4th quarter of 2013.
Secondly, Nokia has now created a little teaser site for the upcoming release of the Lumia 928. While no detailed technical details are given, this teaser site follows a recent magazine ad which features its PureView technology, low-light photography prowess, and image stabilization.
Summary and Conclusion
As shown in my disclosure, I am long Nokia. Based on the latest published information, and my personal observations, I am sticking with this company.
Disclosure: I am long NOK, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.