This, as bold as it sounds, is now a virtual certainty for a number of reasons:
· All the growth is at the low-end in developing markets
· Western markets are saturated with little growth opportunity
· Strong enterprise growth
There were some signs that Apple (AAPL) was going to target the low-end smartphone market in its recent announcement, this wasn't to be and it released the 5S, a repackaged iPhone 5 in a colorful shell. It is now clear that Apple will never go after the low-end market, it is much more concerned with retaining its impressive margins. This leaves the low-end markets to Windows Phone and Android. Nokia (NOK) has had a legitimate hit with the Lumia 520, there are already signs the Lumia 625, another budget handset is selling well and there are rumors of an updated 520 to be introduced at Nokia's October 22nd announcement. Expect to see more and more budget handsets released in the new year with Microsoft (MSFT) at the helm to exploit this opportunity.
The 520 is now the most popular WP handset worldwide with a 32.8% share
The high-end market and the Western markets where Apple is most popular are saturated, Apple has a strong hold in the US, but there is little growth opportunity. Apple will continue to drive fantastic profits from these territories, but not the growth that Wall Street craves. Conversely due to its low market share Microsoft has just as much opportunity for growth in the high-end Western markets as it does in the emerging markets.
With BlackBerry (BBRY) down on the canvas with the count approaching 10, the enterprise market is up for grabs; Apple has never been interested in the Enterprise being a pure consumer play and Android is seen as too insecure to make any inroads, this is Microsoft's to lose. With its strong enterprise links and continued integration with Windows 8, this will provide another shot of growth in the arm.
Where is the growth for Apple
Apple can continue to show growth with its high-end handsets in China, and other emerging markets, but due to price sensitivity the growth rates will not match the double digit growth that can be achieved at the low end. Nokia is selling the Lumia 520 for under $100 and will, most likely, push hardware to even lower price points in the coming years.
The following graph shows the current breakdown of sales, iOS is selling roughly triple that of Windows Phone.
Top Smartphone Operating Systems, Shipments, and Market Share, Q2 2013 (Units in Millions)
2Q13 Unit Shipments
2Q13 Market Share
2Q12 Unit Shipments
2Q12 Market Share
Current growth levels
Windows Phone is growing at around 30% per quarter, recent AD Duplex numbers confirm that these growth rates will continue for quarter 3.
The following table shows quarterly sales to the end of 2014 with three different growth rates, the first being the current growth rate, then lower growth rates to provide for more modest expectations.
At the lowest growth rate Windows Phone still overtakes Apples' current sales, although Apple, most likely, will have grown from its current level. Realistically the middle growth rate of 20% would be sufficient to take the number 2 spot in 2014.
Apple, with its current strategy, has given up the opportunity for any significant growth, and instead will see modest growth and a marginal decline in margins. Microsoft, on the other hand, is going to aggressively target the low-end of the market, while at the same time, enjoying growth at the high-end due to its low market share; add Enterprise sales to the mix, and it paints a very compelling picture that Windows Phone will be sitting in the second spot come the end of 2015.