Better App Selection Could Boost Nokia Stock by 5%

August 30th, 2010 by Trefis Team
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Finnish mobile phone giant Nokia (NYSE:NOK) recently acquired the mobile Web analytic service Motally for an undisclosed sum. Nokia competes with Apple (NASDAQ:AAPL), Research in Motion (NASDAQ:RIMM) and Motorola (NYSE:MOT) in the mobile phone market.

Motally sells analytic software that helps mobile application developers track application usage statistics on mobile phones. We believe this acquisition will draw more mobile app developers to Nokia’s platform. This should help Nokia improve its online app store and thereby help the company sell more phones. Our analysis follows below.

Nokia struggles in developed markets

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We estimate that North America and Europe constitute around 17% of the $12 Trefis price estimate for Nokia’s stock. We expect Nokia to continue losing market share to Apple and RIM in these markets during the Trefis forecast period.

Nokia’s share of the mobile phone market in Europe and North America fell from  30% in 2007 to around 27% in 2009.We currently forecast that Nokia’s share will slip to 20% by the end of Trefis forecast period.

You can drag the trend-line in the chart below to create your own forecast for Nokia’s share in developed markets and see how it impacts the company’s estimated share value.

Apps matter

The availability and quality of mobile applications have become important differentiators in the mobile phone market. Nokia might be able to stop its decline by leveraging Motally’s tools to improve its Ovi app store.

We see a potential  upside of 5% to the $12 Trefis price estimate for Nokia’s stock if its developed market share stays at 27% through 2016, rather than declining to 20% as we currently forecast.

This can only happen if Nokia starts offering its customers more and better apps. The Ovi store presently offers only 13,000 apps, compared to more than 200,000 apps at Apple’s App Store and more than 70,000 apps at the Android store.

We expect Apple customers to download more than billion apps downloads from the Apple App Store in 2010. This huge volume gives Apple a significant revenue stream and also helps it sell more app-rich iPhones.

How Motally can help

Motally’s tools help mobile software developers understand how users engage with their apps. Crucially, the technology measures usage rates for downloaded apps. These data should make it easier for third-party developers to monetize their work.

If developers start making more money on Nokia’s mobile platform, more developers will come, which in turn should help Nokia offer a richer library of apps to its customers.

You can see the complete $12.33 Trefis Price estimate for Nokia’s stock here.