Nokia-Yahoo Deal a Smart Play to Attract U.S. Smartphone Buyers

Includes: AABA, NOK
by: Trefis

Nokia (NYSE:NOK) and Yahoo (NASDAQ:YHOO) recently announced a partnership in which the companies will leverage each others’ strengths in e-mail, instant messaging, digital maps and navigation services. We believe this partnership could help Nokia resurrect its declining mobile phone market share in developed markets like the US and Western Europe.

Nokia has only around 8% share in the US mobile phone market, compared to around 38% globally as of 2009. By better integrating Yahoo services (Mail, Messenger) into its existing Ovi mobile phone platform, Nokia will improve its appeal to a large customer base of Yahoo users.

Nokia’s Share in Developed Markets Expected to Decline

Developed markets (US and Europe) constitute about 18% of the $23 Trefis price estimate for Nokia’s stock. We currently believe that Nokia’s market share in developed markets will continue to decline from around 27% in 2009 to around 23% by the end of the Trefis forecast period.

However, there could be an upside of more than 2% to the $23 Trefis price estimate for Nokia’s stock if Nokia’s partnership with Yahoo could help Nokia maintain its market share in developed markets rather decline as we forecast.

Nokia can Leverage Yahoo to Gain Share in the Developed Markets

Yahoo has an extensive presence in the US with about 150 million unique visitors visiting its sites every month. Nokia will enhance its Ovi internet services with Yahoo’s services to make its mobile phones much more attractive to the loyal Yahoo customer base.

Yahoo Mail and Messenger on Ovi

Nokia currently provides Ovi Mail (e-mail) and Ovi Chat (instant messaging) on Nokia mobile phones. Ovi Mail and Ovi Chat will now by powered by Yahoo and will better integrate with Yahoo! Mail and Yahoo! Messenger service.

Although Nokia and Yahoo have collaborated for years, the latest deal is in part a reaction to the success of Google’s (NASDAQ:GOOG) Android which is quickly gaining share within the smartphone market and offers easy integration with Gmail and Google Calendar, making Android-based phones appealing to the large base of Gmail users.

The new Nokia-Yahoo deal similarly strengthens the appeal of Nokia phones for the millions of users of Yahoo! Mail and Yahoo! Messenger.

Ovi Maps on Yahoo

Ovi map and navigation is a service through which users can browse places, search for addresses and plan trips. Ovi map and navigation services will be integrated across a variety of Yahoo properties and Yahoo! Maps will be powered by Ovi. Integration between Yahoo and Nokia will help Yahoo users to quickly transfer information from Yahoo! Maps or Yahoo! Directory (addresses, directions, maps and phone numbers) to their Nokia smartphones. Such conveniences will help reinforce the appeal of both Yahoo and Nokia for those customers.

You can modify our forecast for Nokia’s market share in developed markets above to see how its stock could be impacted if the Nokia-Yahoo deal were to help Nokia maintain share in developed markets (like the US) rather than decline as we forecast.

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