Nokia Expands Asha Line To Include Fully-Touch Phones; Bolsters Emerging Market Prospects

by Trefis Team
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Nokia (NYSE:NOK) hasn’t given up on Symbian just yet. The Finnish handset maker added three new models to its Asha portfolio of S40 based mobile phones in a bid to defend its market share in the emerging markets. The new low-end offerings feature a re-designed full-touch interface that will help Nokia compete directly with the cheap Google’s (NASDAQ:GOOG) Android-based smartphones that have been putting pricing pressures on its earlier S40 models.

While the Lumia series of Microsoft (NASDAQ:MSFT) Windows Phones gradually gain momentum, Nokia will be looking to slow the decline of its Symbian sales so as to make the transition less painful. Our price estimate for Nokia’s stock is $5, more than 50% ahead of market price.

See our complete analysis for Nokia stock here

Nokia tries to address plummeting  Symbian sales

The most valuable market for Nokia has historically been the emerging markets where although its market share has been declining fast, it has mostly remained ahead of the rest in terms of total units shipped. By our estimates, Nokia’s emerging markets division accounts for almost 40% of the company’s value, the most among all the divisions.

Last quarter, however, Samsung raced ahead to become the world’s largest handset maker breaking Nokia’s 14-year stranglehold on the top position. Consequently, Nokia’s revenues from emerging markets fell more than 40% over Q1 2011 as the proliferation of cheap Android-based smartphones manufactured by Asian rivals ate into the volumes of its S40 based feature phones. Until now, Nokia had been able to bring down the prices of its feature phones or enter into the dual-sim phone segment to compete and turn a small profit. But the entry of low-cost $100-$150 Android touch-based smartphones left it with little choice but to bring the prices of its feature phones further down to drive sales.

While the company is pinning all its hopes on the Windows Phone to rejuvenate its smartphone sales, it cannot let Symbian decline rapidly since it still accounts for a majority of  its sales currently, especially in the emerging markets. The new full touch low-end quasi-smartphones that Nokia has launched will help it compete directly with the cheap Android rivals that are infiltrating the market, thereby decreasing the pricing pressures and slowing down the decline in Symbian sales.

Additionally, Nokia has also made an important acquisition at the start of 2012 that will help bolster its emerging market prospects in the coming years. It acquired a Norway-based mobile OS developer, Smarterphone AS, whose proprietary software platform would help enrich user experience on feature phones by providing a highly advanced touch-based functionality on very moderate hardware. (see Nokia Buys Smarterphone AS; Positive for Emerging Market Penetration ) This will help Nokia replace the old S40 software on its feature phones, make its low-end phones smarter and address the huge demand for quasi-smartphones that have already started making an appearance in the Chinese markets. (see Chinese Telcos Look to Boost Margins With Cheaper Smartphones)

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