Windows Phone Makes Solid Gains On The Eve Of The Microsoft Takeover

| About: Microsoft Corporation (MSFT)

These are the final days we are seeing "Nokia Lumia" (NYSE:NOK) in the markets, as the brand is soon to be replaced with "Microsoft Lumia" (NASDAQ:MSFT). Meanwhile the Windows Phone ecosystem continues to make solid gains around the world as Nokia is getting out of the scene.

According to Kantar Media Panel, Windows Phone was the fastest growing mobile operating system in many parts of the world as of the end of last November. This is particularly the case in Europe where Nokia enjoys a strong brand name. In Euro5 zone (consisting of the 5 largest countries in Europe, namely, Germany, Great Britain, France, Spain and Italy), Windows Phone's market share rose from 4.7% to solid 10.0% between November of 2012 and November of 2013. During the same period, Android (NASDAQ:GOOG) made some gains as it increased its market share from 61.5% to 69.1% and iOS (NASDAQ:AAPL) lost market share as the operating system's market share shrank from 24.6% to 18.1%. As the European economy continued its slow and painful recovery, many Europeans were choosing cheaper phones which Android and Windows Phone ecosystems offer. When it comes to Apple's iOS, even the cheaper phones are priced pretty high.

When we look at specific countries, Windows Phone performs best in Italy where the ecosystem enjoys a market share of 16.0%, up from last year's 11.8%. According to Kantar, Windows Phone has a higher market share in Italy than iOS, which enjoys a market share of 11.0% in the country. Last year, the market share of iOS in Italy was 20.1%. Since Italy is one of the countries that were hit worst by the European recession, it makes sense to believe that Italians will be more likely than other Europeans to adapt cheap Android and Windows Phone devices as opposed to iOS and BlackBerry (NASDAQ:BBRY) devices.

In France, Windows Phone's market share was a solid 12.9%, up from 4.2% in the previous year. This market gain probably came from losses of BlackBerry, iOS and Symbian which was phased out by Nokia during last year. BlackBerry's market share in France fell from 4.4% to 2.2% and iOS saw its market share decline from 23.2% to 18.6%. Symbian operating system had a market share close to 6% but it has no market share in the country anymore, as the operating system doesn't exist at the moment.

In Great Britain, Windows Phone made some solid gains, moving its market share from mid-single digits to low-double digits. Between November of 2012 and November of 2013, Windows Phone's market share in Great Britain rose from 5.1% to 10.8%. Until last year, BlackBerry had a strong presence in the country but the operating system's market share fell from 6.5% to 2.4%, making room for Windows Phone to grow. Meanwhile, iOS lost a market share of 5.5% while Android gained a market share of 4.2% in the country, giving Android 55.7% of the market share and iOS claimed 30.6% of the market.

Spain is a market that's heavily owned by Android. According to Kantar, Android claims a market share of 87% in the recession-hit country, thanks to its cheaper models. In Spain, BlackBerry saw its market share decline from nearly 4% to almost 0% while Windows Phone gained momentum as it increased its market share from 1.9% to 4.8%, claiming almost all of the market share lost by BlackBerry. Meanwhile, iOS seems to have a very small existence in Spain with a market share of 6.3%, putting it slightly above Windows Phone.

In the US, Android and iOS pretty much own the market, claiming about 90% of the total market together. Nokia's brand name in the US is not as strong as it is in Europe; however, Windows Phone continued to make progress in baby steps in the country. Currently, Windows Phone enjoys an American market share of 4.7%, up from last year's 2.7%. In the country, Android continues to gain on iOS as Android's market share rose from 42% to 50%, while iOS saw its market share decline from 53% to 43%.

In China, Windows Phone failed to make any progress as the operating system's market share remains at 2.7%, representing no change from the previous year. It looks like Nokia's partnership with China Mobile didn't result in much of a market share gain for the company. China continues to be dominated by Android where Google's operating system claims a market share near 80%. Windows Phone and iOS will have to step up their game big time if they want to gain a meaningful market share in China.

In Australia, Windows Phone made some gains as it reached a market share of 6.9%, up from the 4.2% in the previous year. While Australia is a small market, it represents one of the few markets where Android saw its market share decline. Android's market share in the country fell from 58.0% to 55.1% during the year. Notice that Android's market share decline is very close in size to Windows Phone's market gain in the nation (2.9% vs. 2.7%).

The next few months will tell us a lot about where Windows Phone is headed. Until now, the operating system made some serious gains with help of Nokia which claims about 85% of the market share in Windows Phone. Without Nokia's help, Windows Phone would not have gained any meaningful market share. Starting this year, we will have a chance to see if Windows Phone will be able to continue its growth with the absence of Nokia. The next few months are very crucial for Microsoft and consumers aren't known to be in love with Microsoft products (with the exception of Xbox). Will Microsoft be able to take the flag from Nokia and carry it to the farther distances? We'll see.

I am long Microsoft and I believe that Microsoft should stay as a software company rather than building hardware. Software is where Microsoft's strong margins sit and that's where money is made. Hardware business usually comes with razor thin margins (if not negative) and I hope that Microsoft won't turn into a hardware company over time.

Disclosure: I am long MSFT, 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.