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Focus On Nokia As Battle For Third Ecosystem Heats Up

Saturday - 4/6/2013, 10:04pm  ET

As the battle for a third ecosystem in the smartphone market continues to take shape, attention has shifted away from the top end of the market to turnaround player Nokia . Both the Finnish handset maker and its competitor, Blackberry , are wedged in an unforgiving fashion of competition - a race for third place.

Personally, I opine that Blackberry is a formidable competitor. In addition to its BB10 gaining momentum in mature markets like Europe and Canada, there is huge potential upside considering that the company reversed its troubled fortunes and turned surprise profits of $98 million, or $0.18 per share, in Q4 2012. Nokia’s turnaround story, though not as impacting as Blackberry’s, also has its rosy side. However, in the long run, the race will not entirely be won by innovation or any other parameters that analysts may want to hash out, but by something that Apple and Google realized a long time ago - numbers.

Yes, smartphone wars have boiled down to a game of numbers. As consumers get absorbed into carefully thought out mantras like ‘creating revolutionary products,’ Apple and Google continue to do what they do best - rope in new customers, whatever the cost. Through the years, the two have established a solid market share lead over their peers and, in the process, carved out the lion’s share of the market.

What is Nokia doing to reclaim its market share? Better yet, will Nokia get more numbers than Blackberry to secure a third place position?

Notable inroads into key markets

Blackberry isn't alone in making inroads into Europe. In a research study released by Kantar World Panel at the onset of April, Nokia’s Windows 8 platform, which is designed by Microsoft , was noted to have gained significantly in Europe and other key markets.

The research, which relates to 2012, shows that in the past year, Nokia’s Windows 8 platform gained more than 3 points year-over-year in Britain to secure a 6.7% market share. A similar trend was witnessed in Italy, where Windows 8 Phone gained 7.7 points year-over-year to come in at 13.1% market share. Likewise, the Windows 8 platform gained 1.7 points in Australia to secure a 3.4% market share.

In addition to gaining in these defining markets, Nokia managed to do what was earlier thought impossible. The IDC’s latest report shows that the Finnish handset maker, through its Microsoft Windows 8 powered Lumia handsets, managed to out-ship Apple in not one, but seven markets. This feat speaks volumes of the potential inherent in Nokia. The same report also shows that Nokia’s Lumia has shipped more than Blackberry in over 26 markets. I personally believe that this early lead could set the tone moving forward.

Brand recognition more important than ever before

Moving forward, brand recognition will be more important than ever before. Going by the undisguised saturation in mature markets, I'm inclined to believe that emerging markets will be the melting pot of smartphone wars in the next five years. In emerging markets, companies with already-established brand names will get a head start over their peers.

In India particularly, Nokia will gain immensely. Data released by CyberMedia Research shows that smartphone penetration in the entire Indian handset market is a mere 7%. Although the smartphone market is dismally small, there's huge growth potential. The research shows that the high end category of the smartphone market grew at a racy 35.7% to 15.2 million units in 2012, up from 11.2 million units the previous year.

Feature phones, on the other hand, grew 19.9% to 206.4 million units in 2012, up from 172.2 million units in 2011. In addition, Nokia dominates feature phones, while Samsung dominates smartphones. Bringing these figures into perspective, it becomes evidently clear that there is a feature phone glut in the Indian market. This, essentially, means that Nokia is the dominant handset maker in the entire market. The research actually pegs its market share at 21.8%, compared with Samsung’s 13.7%.

What does this mean for Nokia?

Nokia has the upper hand in India. Because of its solid footing and brand recognition, it will have an edge while guiding its feature phone customers through a smartphone transition. What’s more is that its Nokia Asha phones, which are sold at the price of feature phones but extend the functionality of smartphones, will provide a platform to woo consumers into considering mid-range smartphones like the Lumia 520 and the Lumia 620.

Conclusion

Nokia’s case in India is, in many ways, reminiscent of the situation in other emerging markets. As such, there's a real possibility of Nokia transforming its huge presence in the feature phone market into a sizeable smartphone market share. This could give the company a huge edge over Blackberry in the race for third place. 

This article was originally published as Focus On Nokia As Battle For Third Ecosystem Heats Upon Fool.com

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