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1 Tech Stock Ready to Seize a Massive Opportunity

By Jonathan Yates – Jan 16, 2013 at 5:00PM

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Sales to emerging-market consumers could soar for Nokia.

Nokia (NOK -2.18%), the Finnish mobile phone company, is in position to be a winner in what one consulting firm has dubbed "the biggest growth opportunity in the history of capitalism."

Global consultants McKinsey & Co. recently published "Winning the $30 Trillion Decathlon," which reported on how consumption spending in emerging market countries should reach that massive title figure by 2025, composing half of all global consumer spending. McKinsey claims that this represents "the biggest growth opportunity in the history of capitalism." 

Global mobile phone sales look promising for Nokia
While emerging-market consumers obviously won't spend the entire $30 trillion on mobile phones, their growing purchasing power could leave Nokia in a position to profit. The Finnish phone maker is the No. 2 mobile phone seller in the world. It has a much better market position in selling feature phones such as the Asha. Nokia is very strong in this market segment, selling 9.3 million of the Asha feature phone in the fourth quarter of 2012. 

Feature phones, which do not have all the advanced components of smartphones, were about 70% of the global market for mobile phone sales in 2011. By 2013, feature phones are expected to be about half of all global mobile phone sales, as smartphones such as the Lumia series from Nokia and iPhones from Apple increase in market share from about 30% in 2011 to 50%.

Not every country has the infrastructure
Even with that decline in market share, sales of feature phones will still be huge. In 2016, over 2.3 billion mobile phones are expected to be sold: more than 1 billion should be feature phones. Even though that is a decline in market share for feature phones, it could be an increase in the number of units sold from the present amount due to the overall growth in the market.

Nokia is moving forward in India, Indonesia , and other emerging-market countries that are fertile for feature phone sales due to infrastructure deficiencies and handset costs that make the iPhone 5 and other smartphones unsuitable. No nation in Africa has a functional 4G network yet. Feature phones, however, can operate fine on 2G and 3G networks, and do not need the 4G networks that optimize smart phone usage.

Nokia smartphone sales are improving
Record demand was just reported for the Lumia smartphone last quarter, with sales particularly strong in China and India. The Lumia is a prominent example of Nokia's partnership with Microsoft, as it runs on the Windows operating system. The Lumia 920 smartphone is selling well in a venture with China Mobile, the world's biggest mobile phone company. According to a study by International Data Corporation, strong sales of the Lumia should continue.

As the chart below shows, International Data Corporation projects that the Windows operating system will expand in use globally more than any other platform. Towards that goal, Nokia sold 4.4 million Lumia smartphones for the most recent quarter, topping the previous record of 4 million for the second quarter of 2012 and besting the 2.9 million sold in the third quarter of 2012.  

Worldwide smartphone OS market data

Operating System

2012 Market Share

2016 Market Share

2012-2016 CAGR

Android (Samsung and Google)

61%

52.9%

9.5%

Windows Phone 7/Windows Mobile (Nokia and Microsoft)

5.2%

19.2%

46.2%

iOS (Apple)

20.5%

19%

10.9%

BlackBerry (Research In Motion)

6%

5.9%

12.1%

Others

7.2%

3%

(5.4%)

Total

100%

100%

12.7%

Source: International Data Corporation.

What a Fool should follow
Robust Lumia smartphone sales in emerging market nations are critical for Nokia to be a winner in the "$30 trillion decathlon." Nokia needs for Lumia sales to be strong in China, India, and other developing countries as feature phones are predicted to lose market share to the rising popularity of smartphones. If greater sales of the Lumia continue to better Nokia's financial position, that is a very bullish signal for Foolish investors.

Fool contributor Jonathan Yates has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, China Mobile, Google, and Microsoft. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nokia Oyj Stock Quote
Nokia Oyj
NOK
$4.94 (-2.18%) $0.11
Microsoft Stock Quote
Microsoft
MSFT
$250.20 (-1.89%) $-4.82
Alphabet Stock Quote
Alphabet
GOOGL
$99.48 (-0.96%) $0.96
Apple Stock Quote
Apple
AAPL
$146.63 (-0.80%) $-1.18
BlackBerry Stock Quote
BlackBerry
BB
$4.84 (-6.92%) $0.36
China Mobile Stock Quote
China Mobile
CHL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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