Expectations for Nokia’s Developed Market Share Remain Low

| About: Nokia Corporation (NOK)

Nokia’s (NYSE:NOK) market share in developed markets like North America and Europe has declined consistently, from around 40% in 2003 to around 27% in 2009. [1] This can be attributed to lower demand for its phones due to Nokia’s inability to attract customers, particularly from US. We expect Nokia to continue facing stiff competition from Research in Motion (NASDAQ:RIMM), Apple (NASDAQ:AAPL), Motorola (NYSE:MOT) and Google (NASDAQ:GOOG).

We estimate that Developed Markets Mobile Phones constitute around 17% of Nokia’s stock. We currently have a Trefis price estimate of $12 for Nokia’s stock, about 26% above the current market price of $10.

Although Nokia sells more smartphones than any other mobile company, it has struggled to stay ahead of competitors like Apple, RIM and Google in terms of smartphone innovation and has been playing catch-up since Apple disrupted the smartphone market in 2007 with the iPhone. In addition to hardware, the success of Nokia’s smartphone revival depends on a better mobile operating system (potentially Symbian OS 3) and a rich app store.

Motivated by Apple’s success with iTunes and its App Store, Nokia launched its own services platform called Ovi in 2008, which provides consumers online access to gaming, music, navigation, and other applications. The long-term success of Ovi will be an important factor that influences consumer preferences for Nokia smartphones and consequently Nokia’s mobile market share.

The average of Trefis member forecasts for Market Share in Developed Markets indicates a decrease from 28% in 2010 to 26% by 2016, compared to the baseline Trefis estimate of a decrease from 26% in 2010 to 20% by the end of the Trefis forecast period. The member estimates imply an upside of 4% to the Trefis price estimate for Nokia’s stock.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Nokia’s stock to Market Share in Developed Markets.

Note: Nokia’s historical share in Developed Markets is calculated as : Nokia Developed Markets Unit Volume / Industry Unit Volume. Nokia reports unit volume data by geography and industry unit volume in its annual 20-F filings. We have defined Nokia’s developed markets consisting of North America and Europe, and have aggregated data from these two regions to arrive at Nokia Developed Markets Unit Volume.

Disclosure: No positions