Microsoft Corporation (MSFT), Nokia Corporation (ADR) (NOK): Why the Windows Phone Has a Bright Future

The Windows Phone is dead right? Apparently not-survey after survey indicates that Microsoft Corporation (NASDAQ:MSFT)’s  mobile platform is gaining strength. In fact, Windows is growing faster than and other operating system and its best days might still be ahead.

Microsoft Corporation (NASDAQ:MSFT)

Quiet success story

This conclusion is based on recent numbers from Kantar WorldPanel ComTech. It shows Windows increased its U.S. market share from 2.9% in the second quarter of 2012 to 4% in the second quarter of 2013, for a gain of 1.1 points. While iOS and Android battle for the title of the top selling mobile operating system, Windows is quietly stealing share.

Smartphone OS Sales Share (%) Q2 2013 Q2 2012 YoY % pt. Change
Android 51.5 52.6 -1.1
iOS 42.5 39.2 3.3
Windows 4.0 2.9 1.1
BlackBerry 1.1 4.0 -2.9
Other 0.9 1.4 0.5

Source: Kantar WorldPanel ComTech

And Windows success isn’t restricted to the U.S. The platform is picking up share overseas as well. In Europe, Windows took 6.9% of smartphone sales during the second quarter gaining 2.2 percentage points year over year. Windows is consolidating its position as the third operating system on the continent accounting for 9% and 8.6% of smartphone sales in France and Britain respectively.

Nokia Corporation (ADR) (NYSE:NOK) has been the biggest beneficiary of this trend. The Finnish handset manufacturer is responsible for 87% of Windows handset sales globally. Although it made up only 4% of smartphone sales worldwide during the first quarter of 2013, Nokia Corporation (ADR) (NYSE:NOK) has seen its share of sales rise from just 1% during the same period last year. Finally, Nokia Corporation (ADR) (NYSE:NOK)’s bet on Windows appears to be paying off.

But the best day are still ahead

Fortunately for Microsoft Corporation (NASDAQ:MSFT) investors, these positive results are expected to continue. According to estimates by Canalyst, Windows is expected to start closing in on the iPhone with 12.7% of smartphone sales worldwide versus the iPhone’s 14.1% by 2017. Three trends are driving this growth.

First, Windows Phones are particularly popular with first time smartphone buyers. Of those that bought a Windows handset in the past year, 52% upgraded from a feature phone. With feature phone owners still making up over half of U.S. mobile phone owners, Microsoft Corporation (NASDAQ:MSFT) is well positioned to capture this market.

Second, Microsoft Corporation (NASDAQ:MSFT)’s main competitor for the industry’s bronze medal is in disarray. Over the last none months BlackBerry Ltd (NASDAQ:BBRY) has lost eight million subscribers. The company’s BB10 launch is a flop. Last quarter the struggling Waterloo company moved only 2.7 million BB10 devices falling well short of the street’s expectations.