Nokia-Microsoft’s OS Impact on Android Limited for Now

February 18th, 2011 by Trefis Team
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Google’s (NASDAQ:GOOG) Android smartphone operating system has seen tremendous adoption over the past year as its market share has increased from a mere 6% in 2009 to around 24% by 2010. [1] This has come at the expense of smartphone operating systems from Nokia (NYSE:NOK), Research in Motion (NASDAQ:RIMM) and Microsoft (NASDAQ:MSFT). The other main competitor, Apple’s (NASDAQ:AAPL) iPhone OS, saw a slight increase during this time period from 26% to 28%. [1]

We believe that Android’s success has to do with the fact that it partnered with smartphone makers like Motorola Mobility (NYSE:MMI), Dell (NASDAQ:DELL), LG and Sony Ericsson in providing its OS. Higher Android adoption helps Google by enabling more mobile searches from Google’s platform as Google is the default search engine on Android phones (See Google Market Share in Search to Grow From Android).

Has the Nokia-Microsoft partnership changed the mobile search market landscape?

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Here we try to answer this question and the possible impact on the $603 Trefis price estimate for Google stock, which is roughly in line with the current market price.

See our full analysis and $603 price estimate for Google

Microsoft Looking to Expand

Microsoft has repeatedly demonstrated that is wants to push aggressively into the search advertising market and take market share from Google. It started with its partnership with Yahoo (NASDAQ:YHOO) (See Microsoft’s Deal with Yahoo Could Hurt Google’s Stock). Microsoft then partnered with Facebook through which Bing tried to bring the social search angle to the fore (See Social Search with Bing-Facebook Combo a Threat to Google’s Stock). And now according to the latest strategic partnership with Nokia, Nokia will adopt Windows Phone 7 as its main operating system for its smartphones. [2] This deal provides Microsoft with an opportunity to gain market share in both the smartphone operating system market and the search advertising market as it leverages Nokia’s large global presence across the globe.

[trefis_forecast ticker=”GOOG” driver=”0565″]

How Does it Impact Google?

Mobile search market is becoming an important component of search market. According to Google, revenues from mobile search advertising could have been around $1 billion in 2010 for Google alone (See Google Market Share in Search to Grow From Android). [3] With the fast growth that the smartphone market is showing, mobile search is going to play an even more important role going forward. In the short term, Google doesn’t need to worry about the Nokia-Microsoft partnership, as the transition of Nokia smartphones on Microsoft Windows Phone 7 could take up to two years. However, in the long term, Microsoft could expand its Bing search market share and threaten Google’s dominance in the search market.

[trefis_forecast ticker=”MSFT” driver=”0809″]

Notes:
  1. MediaPost Online citing eMarketing, Jan 27, 2011 [↩] [↩]
  2. Microsoft press release, February 2011 [↩]
  3. See SeekingAplha: Q3 2010 earnings conference call transcript, October 2010 [↩]