Smartphones Can Slow Nokia Share Loss in Emerging Markets

Nokia (NYSE:NOK), which competes with Apple (NASDAQ:AAPL), Research in Motion (NASDAQ:RIMM), and Motorola (NYSE:MOT), continues to lose market share in emerging markets like India, China and Brazil.  We estimate that Nokia’s mobile phone share in emerging markets declined from about 45% in 2008 to 43% in 2009.

We expect Nokia’s share to decline further over our forecast period.  Despite this, we believe that Nokia’s expanding smartphone portfolio and growing share within the smartphone segment can slow Nokia’s overall mobile phone share declines within emerging markets.

Below we discuss the importance of the mobile phone business for Nokia, why we expect Nokia’s share in emerging markets to decline, and how a stronger smartphone portfolio can offset share declines from emerging markets.

Mobile phones constitute 90% of Nokia’s stock

Nokia, the largest mobile phone manufacturer globally, makes money by selling mobile phones to retailers and mobile phone operators like Verizon (NYSE:VZ), AT&T (NYSE:T) and Vodafone.  We estimate that the company’s mobile phone business constitutes 90% of the $26 Trefis price estimate (versus market of $13) for Nokia’s stock. In the mobile phones business, the company makes most of its revenues from emerging markets.

Smartphone Share Rises Despite Overall Share Declines

Nokia’s Mobile Phone Market Share in Emerging Markets declined from about 45% in 2008 to 43% in 2009 due to rising competition from industry players.  In comparison, the company increased its smartphone market share in Q4 of 2009 to 40%, up by 5% on a sequential basis, as a result of the expansion of its smartphone portfolio.  Nokia launched seven phones in the fourth quarter of 2009 compared to three phones Q3 of 2009.

The new phones included popular touch-screen smartphones like the Nokia 5800, N97, N97 Mini, and 5530, all designed to make Nokia more competitive against smartphones from Apple and RIM.  Nokia shipped nearly 10 million touch screens worldwide in Q4 compared to close to 6 million in Q3, up by more than 60%.

Emerging Markets Share to Decline to 40%

We expect slower market share declines in the future and forecast Nokia’s share in emerging markets to reach 40% by the end of Trefis forecast period.  However, you can modify our forecast below to see how Nokia’s stock would be impacted if its share in emerging markets were to decrease less than we forecast as a result of more competitive Nokia smartphones.

For additional analysis and forecasts, here is our complete model for Nokia’s stock.