Microsoft wants more smartphone market share

Microsoft acquired Nokia’s devices and services unit for $7.2 billion in a transaction that closed last April.

***
Share our app with friends, click here
***

At the ongoing IFA event in Germany, Microsoft leveraged the fruits of this acquisition with the planned launch of three new smartphones in the coming months.

While Lumia 830 will replace Lumia 820 that was launched last year, Lumia 730 and 735 will replace Lumia 720.

All three new phones have bigger screen size, memory and better cameras compared to the predecessors.

Although the prices for these new phones have not been disclosed yet, we believe that they will be priced similar to the previous models i.e. near $200 for Lumia 730 and 735, and below $350 for Lumia 830.

In this article, we will explore how these launches fits into Microsoft’s strategy to boost its revenues.

Unlike developed countries where smartphone penetration is above 50%, it is below 25% in many developing countries.

While the adoption of smartphones in developed countries fueled the first wave of global growth, strong demand in emerging markets will drive the next phase.

Currently, the sale of sub-$200 smartphones is prevalent in emerging countries, and we believe that with the availability of smartphones offering better functionality than the existing phones, smartphone adoption and penetration can rise.

According to IDC, global smartphone shipments are on the rise and set to surpass 1.2 billion unit mark this year. 

In Q2 2014, smartphone sales edged past the 300 million mark with substantial growth in sub-$200 smartphone.

High smartphone growth is the result of a variety of factors including steep device subsidies from carriers in developed countries, as well as a growing array of sub-$200 smartphones.

Additionally, Reportbuyer.com forecasts smartphone shipments to grow to 3.9 billion by 2018.

Despite the expected increase in smartphone shipments, the expected shipment figure in emerging regions such as Asia-Pacific will be less than 50%.

We believe this presents an excellent opportunity for smartphone manufacturers that have a sizable market share in these regions.

To capitalize on this opportunity, Microsoft, which has rights to market new smartphone under Nokia’s brand name, is launching upgrades to its existing line of Lumia phones.

By doing so, Microsoft hopes to capture a bigger chunk in the highly competitive emerging markets as Nokia’s brand name is still widely recognized in these countries. Currently, Windows phones’ share in smartphone market is 2.5%. 

If Microsoft can increase its market share to 10% by launching feature rich but cheaper smartphones, which have an average cost of $130, it can generate $50 billion in revenues by 2018.

We have $44 price estimate for Microsoft, which is in line with the current market price.

Source : Forbes.com