Let’s face it: Nokia Corporation (NYSE:NOK)‘s feature phone business is currently being threatened by the low-cost smartphone. At some point in the future, the cost of buying a smartphone will become increasingly cheaper as smartphone technology continues to trickle down to the lower-end market. Considering that Nokia’s feature phone business made up 65% of its net device sales last quarter, and smartphones have only reached 25% penetration worldwide, it’s in Nokia’s best interest to deliver smartphones to address the shift away from the feature phone. The reviews are in, and it’s looking like the Nokia Lumia 620 is going to be smash hit among for emerging markets and bargain hunters alike.
Raising the standard
Stall Android?
Android’s 68.3% worldwide market share can be largely attributed to the abundance of sub-$250 unsubsidized smartphones widely available in emerging markets. Although Google is the current leader within emerging markets, there’s still a massive amount of untapped growth potential for both Nokia and Microsoft Corporation (NASDAQ:MSFT) to claim. Nokia Corporation (ADR) (NYSE:NOK) has priced the phone aggressively, which hopes will be enough to influence cost-conscious smartphone users. If Nokia is successful at pulling this off, it will likely force Android manufacturers to up to the ante.
Who wins?
Right off the bat, Nokia’s pricing is putting the Lumia 620 in position to win against other low and mid-range Windows smartphones. In Asia, Nokia has priced this smartphone about 20% lower than the HTC 8S, which offers a lower pixel density on its screen and half the internal memory. Ultimately, if the Lumia 620 raises the standard for low-end smartphones, it’s going to start a price-versus-quality war within the space. Not only should this be taken as an indication that Nokia’s approach is working, but also that Windows Phone is likely gaining momentum within this high-growth market. Given Nokia’s smaller size and recent return to profitability, a Lumia 620 success story could do wonders for investor sentiment. Nokia’s success could also help investors acknowledge that Microsoft is capable of capitalizing on the trillion-dollar smartphone revolution, and that Qualcomm still maintains a stronghold in chips.
No real competition
The other reason why Android has been so successful in emerging markets is because Android hasn’t had any major competition in the lower-end smartphone segment until now. With the introduction of the Lumia 620 and other low-cost Windows smartphones on the horizon, Android is going to be tested in terms of its strength. Although we don’t know exactly how Android will fare against a formidable low-end competitor, we know that Nokia is addressing its feature phone problems through an aggressive approach of offering high-quality smartphones for a low price. The Lumia 620 should be taken as an indication that Nokia Corporation (ADR) (NYSE:NOK) is determined to regain its place as a top-five smartphone manufacturer in the coming years. Between its return to profitability and seemingly high growth potential ahead in emerging markets, I think it’s time to put Nokia on your watchlist.
The article Has Nokia Built an Android Killer? originally appeared on Fool.com and is written by Steve Heller.
Fool contributor Steve Heller owns shares of Google. The Motley Fool recommends Google. The Motley Fool owns shares of Google, Microsoft, and Qualcomm.
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