) traditionally competes with mobile phone players like Apple
) and Research in Motion (
). A few weeks back, we examined whether Nokia's stock could
benefit from better than expected N8 sales. (
Can Nokia's N8 Smartphone Boost Market Share
) Our analysis was sparked by a Morgan Stanley survey suggesting
that Nokia could sell 2.5 million N8 smartphones during Q4 2010,
and 9 million in 2011. The survey included 150 handset retailers in
5 countries across Europe.
However, according to more recent research by Finnish research
company Inderes, it now appears that Nokia finished Q4 2010 well
ahead of the initial estimates for N8 sales - Inderes estimates the
company sold between 3.5 million and 4 million of the smartphones.
If these estimates are accurate, it could signal added optimism for
$12.46 price estimate for Nokia stock
, which is about 18% higher than the current market price. We
estimate that Nokia generates nearly half (48%) of its stock value
from emerging market mobile phone operations, while another 17%
comes from developed markets.
Market Share Declines a Cause for Concern
We estimate that Nokia sold a total of 450 million handsets in
2010. Hence better than expected N8 sales (of nearly 4 million
units) is still just a drop in the ocean.
The focus here is on the bigger picture. In the recent past,
Nokia has struggled to sustain market share in the face of pressure
from competitors like Apple, Research in Motion and Samsung.
Nokia's market share of the smartphone OS market declined from
around 45% in Q3 2009 to 37% in Q3 2010, while Google's (
) Android has rapidly closed the gap.
Market share losses are by no means a recent trend for Nokia.
The company's mobile phone market share in developed markets
declined from an estimated 29% in 2007 to 24% in 2010, while its
share in emerging markets dropped from 45% in 2008 to 33% in
These are big market share losses for Nokia, and we don't
foresee any recovery unless Nokia can institute a dramatic
turnaround. Could N8 produce that turnaround? On a standalone
basis, N8 is not enough to provide the turnaround that Nokia needs.
It does, however, provide a step in the right direction.
Are Recent Software Issues a Thing of the Past?
Has Nokia sorted out its software-related issues? Difficult to
say, but at least the recent N8 sales estimates provide some
optimism that Nokia has ironed out these concerns. N8 is the first
Nokia smartphone based on the Symbian 3 operating system, so the
market could be indicating that Symbian 3 is notably superior to
its predecessors. Symbian 3 does have a few new features not
included within Symbian 2, like the ability to shoot and edit HD
videos and the ability to show live Facebook feeds. However, it
remains to be seen whether these new features and functionality
improvements can sustain interest from consumers over the long
Double-Digit Stock Upside if Nokia Can Sustain Market
On an optimistic note, if Nokia does indeed manage to improve
its mobile phone sales and maintain market share at 2010 levels of
24% in developed markets and 33% in emerging markets throughout the
Trefis forecast period, there could be an upside of around 10% to
our estimate for Nokia stock. This represents an incremental 10%
upside beyond the 18% premium at which we currently estimate
Nokia's stock value.
This scenario could have indirect benefits as well if the
elevated demand and corresponding bargaining power allows
Nokia more control over product pricing and profit margins in its
mobile phone business.
To see the impact of various market share trends on Nokia's
stock value, drag the trend lines in the modifiable charts
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You can see the complete $12.46 Trefis Price
estimate for Nokia stock here