Nokia (
NOK
) has suffered dramatic mobile phone pricing declines over the last
few years, especially in emerging markets. Nokia competes mainly
with Apple (
AAPL
), Motorola (
MOT
) and Research in Motion (
RIMM
) in the mobile phone market.
One positive sign for Nokia is the growing proportion of
higher-priced smartphones in its product mix. Over the next
two years we expect smartphone sales to provide temporary support
to Nokia's price structure. However, we expect the company's
average phone price to decline after 2012 as smartphone prices
drop. Our analysis follows below.
Potential downside to Nokia's stock
We estimate that emerging markets constitute around 53% of the
$12.33 Trefis price estimate for Nokia's stock
. Nokia faces increasing competition from Apple and RIM in the
high-end market, and Samsung and LG in the low-end market. In
response to this pressure, Nokia has dropped its emerging-market
phone prices drastically in recent years, from an average 94 euros
in 2005 to 54 euros in 2009.
We expect Nokia's average phone price to stabilize at around
51.4 euros by the end of Trefis forecast period. However, there
could be a downside of 20% to the
$12.33 Trefis price estimate for Nokia's stock
if the average price slides to 30 euros by 2016, instead of the
51.4 euros that we currently forecast. You can drag the
trend-line in the chart above to create your own emerging market
price forecast for Nokia and see how it impacts the company's stock
price.
Higher smartphone mix could support short-term pricing
In 2009, Nokia's average smartphone price was around 188 euros.
We estimate the average price of the company's lower-end phones at
around 41 euros. We expect the proportion of smartphone sales
in Nokia's overall sales mix to increase from 16% in 2009 to 43% by
the end of the Trefis forecast period.
We expect average phone pricing to increase slightly from 2010
to 2012, driven by increasing smartphone adoption. However, Nokia
has been dropping its smartphone prices at rapid rates in recent
quarters. The average Nokia smartphone price declined from 188
euros in 2009 to 143 euros in the second quarter of 2010. We expect
Nokia's overall price structure to decline steadily after 2012,
albeit at a slower rate.
You can see
the complete $12.33 Trefis Price estimate for
Nokia's stock here.