Granter has released another round of its much dreaded technology estimates. This time around PC is not the only one under fire; the mobile industry has also been put under the spotlight. According to statistics released by the research firm, mobile phone sales declined by 1.7% y/y in 2012.
Mobile phone sales were 1.75 billion in 2012, as compared to approximately 1.78 billion. This might be a sign of worry for companies that are reliant more on mobile phones as compared to smartphones for their sales. Nokia Corporation (ADR) (NYSE:NOK) has been attempting to stem the flow of its mobile phone market share. Only a few quarters back, the company was the largest mobile phone manufacturer in the world; it now stands at a market share of roughly 18%. The growth slowdown in the mobile segment can be a sign of worry for Nokia, which sold 86 million mobile phones last quarter and only 7.8 million smartphones. The company sold a meager 39 million smartphones in 2012, a y/y decline of approximately 54%.
Nokia has recently partnered with Microsoft Corporation (NASDAQ:MSFT) to launch the Lumia series and is hoping to turn around its fortunes with Lumia’s Windows Phone 8. Last quarter’s results have shown that the Lumia is gaining some momentum and has shown good sales despite availability in limited geographical locations. Microsoft and Nokia investors would be closely monitoring the sales performance of Lumia in China and India. Microsoft has already failed out on ‘Search’ with the mediocre performance of Bing and on ‘Social’ with the dying Windows Live; the software giant would ideally like to at least have a stake in the smartphone operating system market.
Gartner has also stated that although Asha is gaining a lot of momentum, Nokia will have to take the Asha platform seriously and spend more resources to enrich the ecosystem. Both Nokia and Microsoft can benefit from expected growth in the value smartphone segment with Asha and low-end Lumia. According to IHS, value smartphone demand will grow to 559 million from the current 206 million. This 51% growth is almost double the 26% growth rate expected in high end smartphones.
While the overall mobile phone industry has suffered, the smartphone industry is growing at an outstanding pace. According to Gartner, smartphone sales were 207.7 million in 4Q2012, which was a record. This was also a 38.3% y/y increase over smartphones sales in the last quarter of 2011. Apple Inc. (NASDAQ:AAPL) and Samsung have increased their dominance in this arena, with a combined market share of 53% in 4Q2012, up from 46.4% in 3Q2012. Samsung was the biggest smartphone manufacturer in the world and now controls 43% of the Android market. According to Gartner, the word Android is fast becoming synonymous with Samsung and Samsung Galaxy.
Apple’s iPhone 5 revived sales of the Apple smartphone segment with sales at a mammoth 43.5 million units in 4Q2012, y/y growth of 22.6%. A sign of worry for Apple investors can be consumer preference for the low value iPhone 4 and 4s. This can be either because consumers favor the iPhone 4/4s over the iPhone 5 or the iPhone no longer warrants the high margins it used to. I believe it is a combination of both factors with consumers’ disinterest in the lackluster iPhone 5 being the dominant reason. The iPad mini saw a lot of favor from consumers, but according to the research firm this could have also come at the cost of an iPhone 5 upgrade. The slow economy has significantly hampered luxury spending in Europe and America, so consumers were at times left with a choice between an iPhone 5 upgrade or the iPad mini. The lower margins on the mini are already a sign of worry for unrealistic Apple margins.
Nokia has gained some momentum with its Asha and Lumia series, but there is still a long way to go. Microsoft’s Windows 8/WP8 platform will be the key to the long term market share of Lumia. This is because the strength of the entire ecosystem is fast becoming a key requirement for hardware success. Apple remains a global force in the smartphone industry but faces threats from declining margins and competition from high performance and lower priced Galaxy devices. The company will have to choose between a lower priced smartphone and launching new products, such as the much rumored Apple TV, to drive future growth.
The article What These Numbers Mean for Investors originally appeared on Fool.com and is written by Mohsin Saeed.
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