Who Moved My Cheese? Suddenly Smartphone Market is Interesting Indeed

That came out of the blue. Nokia had been solidly plugging along, and the world's biggest handset maker had its smartphone lines comfortably outperforming the overall brand. Just last quarter Nokia's smartphone market share at 41% was 3% better than its globaly market share for all types of phones at 38%. Today Nokia has annnounced third quarter results, and while the big news is that Nokia posted massive losses - produced by its network division, the bigger handset division was profitable - the more surprising and stunning news is that for the first time as far as I can remember, Nokia's smartphone market share has fallen below its total handset market share. To be clear, Nokia's total handset market share has held stable at 38%, and its handset operations are profitable.

But, the big money and big profits are in the smartphones sector, and here Nokia has lost market share drastically. Essentially one in seven Nokia smartphone customers did not buy a Nokia this quarter, they lost one in seven buyers who were previously buying Nokia. And that means suddenly six big market share points are out there, up for grabs. Or in reality, that fight has already been had, in the months from July to September. Who has them?

Looking back at the trends as we saw them for the first half of this year, the strong growing rivals were Apple and RIM/Blackberry. Android (Google) based smartphones by many manufacturers were growing from a tiny base. HTC had been stable. Windows Mobile (Microsoft) based smartphones had been in decline. The others were very tiny, including SonyEricsson, Samsung, Motorola, Fujitsu, Toshiba, Sharp, Sendo, ZTE, and many others.

But six market share points is a big deal. That is more than number 4 biggest maker, HTC and their total sales. It is two thirds of the total market for all smartphones using the Windows Mobile OS. It is half of Apple's iPhone and a little under a third of Blackberry's total market. If most of that six percent goes to one or two players, it will mean dramatic shifts in the smartphone market, heading into the biggest quarter, the Christmas sales.

One, do not make the mistake to count out Nokia. They are by far the biggest handset maker and have the best distribution by a wide margin. They will have major market share even if their product line might be stuttering for a quarter or two - and currently they clearly are really struggling on their smartphone side. But they have done the fight-back before, can you spell Razr? That their market share crashed this quarter, does not spell the end of the N-Series or E-Series. But I would expect very hard-nosed marketing pushes by Nokia to claw back most of that market share for Christmas. And if they get into the 39%-40% range, this should be seen as just a minor mishap, not disaster. However, if the fourth quarter sees Nokia still struggling with smartphones, then we may truly see seismic shifts and signal significant market share shifts for 2010.

But now for the third quarter of 2009, I am very curious. Is it possible that SonyEricsson is making a comeback? Is one of the early Android phones taking off and boosting some players like say HTC. Is the lion's share of Nokia's loss landing in Apple's lap, as more iPhones, or in RIM's lap as more Blackberries. What of the Koreans? EArl;uy on theuy seemed very lackadaisical about smartphones but have recently made noises. Is this now the rise of Samsung and LG in smartphones? I am very curious to see the results from the major smartphone rivals, and then the quarterly numbers when reported by Gartner and Canalys. I can't wait..

Comments

[Markus Lehtiniitty]

"for the first time as far as I can remember, Nokia's smartphone market share has fallen below its total handset market share."

Actually quite recently, if I remember correcly in Q4/2008, Nokia's smartphone marketshare was only 31 % - clearly below its share of the overall market. Then in Q1/2009 smartphone share rose to 38 %, Q2/2009 to 41 % and now we are at 35 %. Interesting to see what happens in Q4.

[kevin]

Today was no surprise. This has been happening for awhile, and I think I posted this awhile back. From 2004 to 3Q2007, using Nokia numbers, Nokia had over 50% smartphone share in every qtr except one (2Q06, 48%). So Nokia was keeping pace as the smartphone market grew. But since then, its share numbers are 47%, 44%, 41%, 35%, 31%, 38%, 41%, 35%. Though smartphones were growing in market share, Nokia's flagship N-series were posting these terrible numbers (approximate, units in millions): 11.4(4Q07), 9.7. 10.1, 8.8, 7.9, 5.0, 4.6, 4.5(3Q09). Disappointing.

Meanwhile, Blackberry grew just about every quarter, going from 2.4m units in 3Q07 to 8.3m in 3Q09. And Apple, though not as evenly as RIM, grew from 0.3m units in 3Q07 to 5.2m in 2Q07 and possibly 8m in 3Q09 (will know Monday).

Yes, Nokia can bounce back but I really haven't seen anything yto convince me yet, as this general decay has been happening for two years now (or since iPhone hit the market).

[kevin]

To be fair and consistent, I should add that Nokia's E-series numbers have grown with the market - going from 1.8m in 3Q07 to 4.4m in 3Q09. But one could've inferred from the overall smartphone numbers that the rest of Nokia's converged devices aren't doing as poorly as the N-series.

[HCE]

I think Microsoft and Nokia are in a similar position in that they were both late to realize that all the key innovations in smartphones going forward were going to be in the software space. Microsoft's lack of action is particularly disgraceful because they are a software company!!

Both companies are in the middle of a major overhaul of their software platform - overhauls that will not be completed until the end of 2010. Until then, IMHO, both are going to get hit. The difference between the two is that Nokia is in a position of much greater strength - given their much larger market share they have enough of a buffer to successfully turn things around. Microsoft, on the other hand, is living on borrowed time. Any further delays in WinMo 7 could finish them as a major player.

- HCE

[CSR Racing Hack]

I couldn't refrain from commenting. Exceptionally well written!