Nokia's New Phones Will Put Microsoft Ahead of Apple

Despite recent, rapid growth, Microsoft's (NASDAQ: MSFT  ) Windows Phone platform remains solidly behind Apple's (NASDAQ: AAPL  ) iPhone and Google's Android in global market share. Microsoft understands it has a hard road ahead, and doesn't believe it can emerge as the dominant mobile operating system provider anytime soon. Still, when the company announced its intention to acquire Nokia's (NYSE: NOK  ) handset business, it argued that it could overtake Apple in terms of global popularity by 2018.

While that may have once seemed unlikely, Apple's slow market-share slide, combined with Nokia's low-cost handsets and new phablets, are exactly what Microsoft needs to take second place.

Overwhelming demand halts Lumia 1520 sales
The Windows Phone platform is seeing some positive signs in more developed economies. Nokia's recently launched Lumia 1520 was temporarily delayed after demand outstripped supply. Customers who had preordered the yellow version of the phone were told they would have to wait longer than expected due to "overwhelming demand." Nokia's 6-inch phablet isn't likely to come close to Apple's iPhone in sales, but a solid U.S. reception should be seen as encouraging.

In the third quarter, Microsoft's Windows Phone saw year-over-year shipment growth of 156%, according to IDC. That's an impressive figure. Most of that growth has come in Europe, where Windows Phone is finally starting to take a sizable chunk of the market. Microsoft's mobile platform still has just 3.6% of the world market, but in Europe's five biggest economies (Britain, Spain, Italy, France, and Germany), its share is more than 10%. If that growth continues to accelerate, it could begin to attract more developer support.

The next billion consumers
But the real opportunity for Windows Phone is in emerging markets, where billions of customers remain unserved. Worldwide, more than 75% of consumers still haven't made the jump to a smartphone, giving Microsoft a great opportunity.

Microsoft could surge past Apple in global market share by staking out a claim on the next billion smartphone adopters. Apple has steadfastly refused to release a true low-cost iPhone, preferring instead to continue production on older models. But Microsoft and Nokia have begun to aggressively target the low end of the market. Two of Nokia's Lumias, in addition to its Asha lineup, will be key.

Nokia's Lumia 520 has become the top-selling Windows phone since being released in April, now accounting for about one-third of all Windows Phone 8 devices. While it doesn't have the stunning camera capabilities of the flagship 1020, it's cheap -- costing just about $150 for an unlocked model. It has sold particularly well in emerging markets such as India, where consumers on limited budgets often don't have the benefit of carrier subsidies. Nokia has already announced the phone's follow-up, the Lumia 525, which offers slightly improved specs.

Then there's Nokia's 1320. Like the 1520, it's a 6-inch tablet running Microsoft's Windows Phone, but the 1320 lacks the horsepower of the more expensive 1520. Still, at just $339 for an unlocked model, it should do well in emerging markets. While the phablet category has remained somewhat niche in developed economies, it's become an overnight phenomenon in emerging markets, with phablets now outselling both tablets and PCs combined in many Asian countries.

If those phones are still too expensive, Nokia has its Asha phone lineup as well. Asha devices do not run Microsoft's Windows Phone, but Microsoft has been said to be considering bringing over some of its Windows Phone services (like Microsoft Office, Skype, and SkyDrive) to the line. When Asha buyers decide to step up to a more powerful smartphone, a Windows Phone might be the easiest choice.

Ceding second place
The smartphone market has been characterized as a two-horse race, and to a large extent, it is. Combined, Android and Apple's iOS account for more than 93% of the total market, with Microsoft's Windows Phone remaining solidly in third place.

But with Windows Phone's rapid growth, and Microsoft and Nokia's willingness to aggressively target emerging market consumers with budget handsets, I expect Microsoft's platform to eventually overtake Apple's iOS when it comes to global market share. 

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Read/Post Comments (27) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 05, 2013, at 1:58 PM, bugnuts wrote:

    Sam Mattera, MF's designated Apple hater. Enjoy your ride to irrelevance, Sammy boy.

  • Report this Comment On December 05, 2013, at 2:02 PM, jdmeck wrote:

    Your Dreaming.

  • Report this Comment On December 05, 2013, at 2:18 PM, Waldo wrote:

    Another fool hit piece on Apple. Come on Sam, pull your head out man! Ever ran windows8? MS is pathetic.

  • Report this Comment On December 05, 2013, at 3:05 PM, djtetsu wrote:

    Wow I was entertained. Yes let's go into emerging markets with paper thin margins and gain market share.

    But no , wait, Android is already doing that.

    Let's go in cheaper than Android, no , how about free?

    What does market share really mean then?

  • Report this Comment On December 05, 2013, at 3:29 PM, butthead2u wrote:

    What does market share mean, really?!?!?

  • Report this Comment On December 05, 2013, at 3:29 PM, twolf2919 wrote:

    Your thesis makes no sense, as your "data points" don't necessarily have anything to do with one another. For instance, you say that MSFT has had 156% year-over-year shipment growth. But without telling us what the two shipment numbers are, how do we know whether that's really an "impressive figure" as you claim? If I sell one phone one year and three phones the next year, I have 300% y-o-y shipment growth, but that's hardly impressive, now is it?

    Then you mention how Windows Phone has attained 10% in the top five european economies. That does indeed sound impressive. But is this growth rate accelerating, decelerating, or staying the same? Gaining market share is not a linear process - the greater the current market share, the harder it becomes to gain more. And, as we've seen with Apple, once you OWN the market, there's only one way to go with market share - down!

    Finally, I think you are deluding yourself if you think that Windows Phone will get an appreciable share of the developing markets - where, as you (and everyone else) state all the growth is. Why? Because it's competing with Android and the dime-a-dozen Smartphones made by local producers. $150 for the Lumia 520 is a good price - but there are probably a thousand Android handsets for the same price and similar, if not superior capabilities out there. And since they're Android, they have significantly more software available to them than the Windows Phone. Why would a cash-strapped emerging market customer opt for the Lumia? Your answer is - why, they already are? But are they? You simply said that the 520 is the top selling WINDOWS phone (which is kind of meaningless unto itself), but you gave no indication of how many were actually sold and, more importantly, how many of them were sold in emerging markets.

    Windows Phone, IMHO, will gain a few more percentage points of market share in Europe (due to the yet-to-recover economy there causing people to buy cheaper phones) and maybe a percent or two in emerging markets. Then, it'll kind of peter out.

  • Report this Comment On December 05, 2013, at 5:02 PM, emilykulish wrote:

    I agree with the author, Apple seems to be losing the market share. I have seen a few Nokia's new models and played with some of them, Nokia is indeed catching up on design, and they have the advantage of having so many models that cover high-end, mid-end and low-end market.

    Apple fans have to wake up, it happened before when Samsung surpassed Apple, and now it's Nokia (Microsoft)'s turn. Take a look at Nokia's 1520, 1320, 1020 and esp. the new 929, you will see the competition for Apple indeed heats up.

  • Report this Comment On December 05, 2013, at 5:12 PM, VegasSmitty wrote:

    The Apple fad is so over!

  • Report this Comment On December 05, 2013, at 5:29 PM, GameBot wrote:

    not only is apple losing market share across most of the globe, they simply cannot maintain margins without eroding actual sales too.

    This is how it began last time.

  • Report this Comment On December 05, 2013, at 6:08 PM, Lyndon1 wrote:

    Bill Gates will be selected as Pope before Microsoft has a phone that would displace an Apple device.

  • Report this Comment On December 05, 2013, at 6:10 PM, butthead2u wrote:

    Correct, the Apple fad is over, it died with Jobs! It's going to be Windows everywhere just as Balmer has been saying!

  • Report this Comment On December 05, 2013, at 6:14 PM, butthead2u wrote:

    Apple devices are so great, eh? Where's Apple TV and Newton? People won't keep over paying when the fad is over and the fad is over cause old people are now buying them!

  • Report this Comment On December 05, 2013, at 6:34 PM, fwe43 wrote:

    Comments here are as expected and worse than the article itself. But whatever, the iPhone is the next Walkman. It will fade. Over my life I've seen companies come and go all the time and Apple will be no different. It will be awhile though, don't kill yourselves apple fanboys. You still have some years left in ya.

  • Report this Comment On December 05, 2013, at 6:44 PM, axd07 wrote:

    right on, great analysis, but this will only happen after blackberry kills iPhone.... lol!!!

  • Report this Comment On December 05, 2013, at 7:50 PM, johnestromjr wrote:

    This consumer hates Microsoft Win8 and almost every other aspect of Windows/Microsoft. They may make a good smartphone but most consumers do not like Microsoft or their OS. If they do overtake Apple they'll have to give their smartphones away just like Google is doing with their Moto X. Microsoft isn't a very good company and Nokia didn't sell out because they were doing so well either. But we'll see. :)

  • Report this Comment On December 05, 2013, at 7:55 PM, constructive wrote:

    Growing market share is easy as long as you don't mind losing billions of dollars!

  • Report this Comment On December 05, 2013, at 9:01 PM, tkell31 wrote:

    But whose market share are they going to take? Judging from the price and target market I would say that is pretty obviously Samsung. In the game of follow the profits Apple will still be king in that scenario. True or not?

  • Report this Comment On December 05, 2013, at 11:57 PM, MIKE001 wrote:

    I THINK THAT MICROSOFT CAN AND WILL OVERTAKE APPLE WORLDWIDE. I think this due to I have the 1020 and I have had ONLY windows phones since they came out. It may take time but it can do it. the toughest market to over take apple is right here in the US but it can be done. I say this because since the death of steve jobs it seems like the new CEO has not been innovating enough if at all. He was riding the wave of steve jobs now that that era is over they look easier to catch up to and pass.

  • Report this Comment On December 05, 2013, at 11:58 PM, rcouellet wrote:

    I love how people are saying "Oh yeah, another apple-hating piece".

    Are you serious? Apple has clearly got the most biased people writing reviews on the internet. I've seen various write-ups on products where the author goes onto say "Product X performs very well, it's great at everything, but this one little feature sucks which means overall the i-whatever is still the best". Doesn't matter of it's a tablet review, laptop review, or smartphone review.

    Do you REALLY think that Apple products are the best, always? If you do, you probably care more about the style/look of a product more than the performance.

  • Report this Comment On December 06, 2013, at 1:22 AM, kevins71 wrote:

    And the funniest headline of the year goes to.....

    Sam Mattera From the Motley Fool

  • Report this Comment On December 06, 2013, at 6:42 AM, flybywire54 wrote:

    I agree with the article . Iphones are good products but so are Nokia/Microsoft phones ( I have two) and they offer a much larger choice at more competitive pricing . The only thing clearly in favour of the IPhone is the number of apps , but even that advantage is dwindling slowly but surely . Most if not all main apps are found on WP phones already . Of course having a bigger market share may not be that important to Apple , that's another story .

  • Report this Comment On December 06, 2013, at 6:45 AM, flybywire54 wrote:


  • Report this Comment On December 06, 2013, at 7:01 AM, flybywire54 wrote:

    Here in Malaysia , the Nokia Lumia 520 is sold for $135 eqv . Impossible to find a good droid at this price .

  • Report this Comment On December 06, 2013, at 10:25 AM, Mathman6577 wrote:

    Apple does not care about market share, especially at the low end. The Windows Phones don't complete w/ Apple at the high end of the market which it owns (Galaxy is actually losing share there). Lumina's are intended for the mid to lower end where it competes w/ Android phones. Apple has nothing to fear from Microsoft.

  • Report this Comment On December 06, 2013, at 10:27 AM, normgarry wrote:

    Motley Fool has absolutely no authority on video gaming or smartphones. Nokia will never surpass Apple. In fact, they'll be fortunate not to end up like RIM.

  • Report this Comment On December 07, 2013, at 2:14 AM, Whatisthedeal wrote:

    All I have to say is if Microsoft allows viruses to run rampant on the windows phone as it has on the Windows for pc's the windows phone will not beat the Iphone, quite that opposite. If Microsoft went after the parties that produce malware and viruses in court, the way it goes after those it claims to have violated it's patents the Windows phone would win.

    But the truth of the matter is that anyone who has ever been the victim of malware or a virus thinks twice before buying anything related to Microsoft.

    I personally am the victim of tubedimmer a company that produces malware that has attached to my windows pc like a cancer. This company is in California and Microsoft should sue them into oblivian but it doesn't care for whatever reason.

    This does not happen on Apple products. You don't get viruses. I am now an Apple convert.

  • Report this Comment On December 11, 2013, at 6:35 AM, GaryDay wrote:

    Apple products don't get virus! Are you kidding, wake up all PC's including Macs get viruses. Check out the following links:

    MS have made mistakes but WP8 is a good and original (unlike Android which is obviously an iOS copy) and modern OS (unlike iOS with it's 1990's style static icons and a tablet OS that just looks like a big phone).

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