The press hit the high points of new research about smartphone sales in Europe. The data were analyzed as part of the Kantar Worldpanel. Largely lost in the tidal wave of information is why Microsoft Corp. (NASDAQ: MSFT) has posted rising market share in Europe. This is due primarily to sales of Nokia Corp. (NASDAQ: NOK) handsets. The phones Nokia has had success with are cheap and have very limited features.
Source: courtesy of Nokia Corp.
At the other end of the market, the one dominated by expensive smartphones, are Apple Inc. (NASDAQ: AAPL) and Samsung. Kantar reported:
Android remains the top operating system across Europe with a 70.1% market share, but its dominant position is increasingly threatened as growth trails behind both Windows and iOS.
While the forecast for the future of Android may be a bit pessimistic, its market share of seven in 10 is remarkable.
As for Nokia and Windows, people who want to spend close to the minimum on smartphones have been the sales driver:
Windows Phone’s latest wave of growth is being driven by Nokia’s expansion into the low and mid range market with the Lumia 520 and 620 handsets. These models are hitting the sweet spot with 16 to 24 year-olds and 35 to 49 year-olds, two key groups that look for a balance of price and functionality in their smartphone.
It is rare that the lowest end of any industry is the most profitable. Some studies show that Apple is the only company that makes a large sum in the smartphone industry, while Samsung makes a small amount. The rest of the industry loses money, probably because of low sales and an inability to press consumers and carriers on pricing.
Windows may have picked up sales in Europe, but the cost to Nokia has to be high enough the it damages both its P&L and balance sheet. There is an old adage in sales: “Cheap gets expensive.” Without a product that can thrive near the top of the smartphone industry, Nokia and Microsoft only have a chance to shore up their position at the bottom of a wildly competitive market.
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