Why Microsoft Has More Upside in China Than Apple

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Somewhat lost in the hoopla surrounding the recently announced news that Apple (NASDAQ: AAPL  ) had finally inked a deal with China's largest mobile carrier, China Mobile, was a tidbit from Nokia (NYSE: NOK  ) that should have fans of Microsoft (NASDAQ: MSFT  ) feeling even better about the coming year.

In the world of mobile, nothing garners attention like Apple, which is why some may have missed, or possibly discounted, the impact of Nokia rolling out its new-ish Lumia 1320 phablet in China -- ahead of schedule, mind you. As Microsoft absorbs Nokia's mobile business in the coming months, its phablet line-up -- generally considered mobile devices with screens in the five to seven inch range -- could absolutely explode in the phablet-loving Asia-Pacific region.

The opportunity
Worldwide phablet market share in Q3 of this year accounted for 21% of all smartphones sold, according to IDC, up from a mere 3% in 2012's third quarter. While phablets are growing in popularity around the globe, the Asia-Pacific region is leading the way, in large part because of the availability of lower-end devices -- which fits right into Nokia's and Microsoft's Lumia 1320 wheelhouse.

And it's not only the big markets like China and India that offer tremendous growth opportunities in phablet sales. In South Korea, for example, phablets already make up a whopping 41% of overall smartphone market share. And in Taiwan, phablets are expected to reach 40% of all smartphone devices sold in the coming year.

But what about Apple and its deal with China Mobile, you ask? Certainly that will put sales pressure on Nokia/Microsoft's Asia-Pacific phablet efforts.

Not for a while, if ever. Never short on rumors, the good news for Microsoft fans is that that's all Apple has offered up in the phablet arena: rumors. Hard to imagine Apple not wanting what some expect will be a $46 billion market this year, one that will only grow from there, but it will be late to the game if it ever does decide to play.

Nice move, Microsoft
The much-ballyhooed Windows Phone update a couple of months ago included a few handy features, including a driver mode to limit notifications while in transit and some new apps to make users' lives a little easier. But the changes that will really make a difference in Microsoft's mobile efforts were making it compatible with the larger screen sizes of phablets and improving its resolution.

Not coincidentally, Microsoft's Windows Phone update came about a week prior to Nokia World, the device maker's annual gathering for unveiling new toys and sharing announcements. The deal to acquire Nokia's mobile business hasn't quite come to fruition, but clearly the two longtime partners have been working as if the deal is done for some time. And there's no doubt the rollout of the Lumia 1320 in China received the blessing of all parties in advance.

Final Foolish thoughts
The introduction of phablets to China, and across the entire Asia-Pacific region before long, wasn't supposed to happen until early next year, according to Nokia's announcement at the World event. And making the news public shortly after Apple spread the good word about its own deal in China may have just been happenstance -- or maybe not.

Coincidence or not, the Asia-Pacific region is a phablet hot-bed and Microsoft is poised to take full advantage, with Apple nowhere in sight. Sure, Apple's China Mobile deal got the press, and it may give its meandering share price the jump-start iFans are hoping for. But when it comes to phablets, it'll be Microsoft investor's smiling all the way to the bank in 2014.

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Read/Post Comments (5) | Recommend This Article (2)

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 30, 2013, at 11:43 AM, brajaharidas wrote:

    Thus speaks another "APPLE HATER."

    I think you all should listen to your mothers and follow their advice. "If you do not have anything nice to say about someone (or some Corporation), DO NOT SAY ANYTHING AT ALL."

    Ever since Apple became the most valuable company on this planet, there has been a bullseye on its back and everyone and his brother denigrate it. Even when it comes out with good news, people (again, Apple Haters) come out of the woodwork and twist it around to make it seem like it is a bad thing. If people will leave Apple alone, it will go up or down on its own merit and not because of you.

  • Report this Comment On December 30, 2013, at 2:14 PM, Drichter wrote:

    I... I really have no words to describe that kind of attitude. Well, other than iSheep, perhaps.

    First, the article has nothing to do with Apple. They're mentioned because they're a big player in mobile, same as articles about Macs sometimes mention windows computers.

    Furthermore, Apple seems perfectly happy to own its choices, so noting those choices and their potential outcome in any article is a far cry from 'denigrating' a company that very recently publicly bashed its competition.

    Third, Apple has never risen OR fallen on its own merits; it's risen and fallen on advertising and marketing, while its products remain the same - not always the best, but consistently above average, to summarize.

    More on topic: Good article, and the first actual coverage I've seen on the subject.

  • Report this Comment On December 30, 2013, at 2:37 PM, whyaduck1128 wrote:

    MSFT usually has "more upside" in a given area than Apple. The problem has been their consistent inability to seize the opportunities.

    Upside means nothing if you can't harness it and take advantage of your opportunities.


    Long MSFT and AAPL

  • Report this Comment On December 30, 2013, at 3:45 PM, brajaharidas wrote:

    Only one thing Ian iSheep can say to you, Mr. denigrator. Baaah!!!!!

    If Apple is mentioned because they are a big player in mobile, why does he not mention other big players in mobile?

    This is exactly my point. Whenever someone mentions Apple, they do it in a snide way that really does denigrate it. Don't tell me that this article puts Apple in a good light? If you say that, then you wither think that everyone else besides you is insane and you are the only sane member here.

  • Report this Comment On December 30, 2013, at 7:27 PM, symbolset wrote:

    Microsoft's upside potential on Mars is limitless. They have absolutely none of the interplanetary mobile device market, so the first device they sell will rocket their share infinity percent! That will give us six months to talk about how far they are out front even of the martians themselves! They should get an employee out there to sell that first unit to himself post haste. No worry about the cost: he can expense it, like they do with Lumias.

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