The basic market dynamics are revealed in the Asian numbers. In Asia overall, Pyramid projects that 3.6 billion smartphones will be sold there from the start of 2010 to the start of 2015. China alone will account for 620 million in the same period (India for about 300 million). In China, Nokia has been the dominant phone seller, based on its Symbian OS, though recently its smartphone sales dropped 10% from its peak. But even with the drop, Nokia sold two of every three smartphones (63%) bought in China. And its Ovi online application store was the most successful in terms of total apps downloaded, according to Bokun.
"Our assumption in China is that, yes, Nokia will decline slightly in 2011," Bokun says. "But overall, if everything Microsoft and Nokia talked about will play out, then the Chinese won't care or know that Nokia phones will run Windows Phone 7 instead of Symbian."
That is, clearly, a big "if." Microsoft will have to sustain software innovation for Windows Phone 7, and avoid the public embarrassments of its glitchy first OS update. [See "Microsoft says it learned key lessons from Windows Phone update fiasco"] Nokia will have to deliver attention-getting handsets with the OS as soon as possible, perhaps by yearend; leverage its manufacturing scale to drive down handset costs; and apply its marketing wizardry to spark and sustain consumer demand.
The main driver for growth in China and other markets in Africa, the Middle East and Latin America will be consumers buying their first smartphone. Even with the challenge of China-based handset makers, such as Huawei and ZTE, offering low-cost Android phones, Pyramid sees Nokia's position in China growing again in 2012, based on the expected new generation of handsets running Windows Phone 7.
Bokun sees the same essential dynamic in Africa and the Middle East: Very few smartphones have been sold so far, in big markets where Nokia remains the clear leader in sales, with very strong relationships with the local wireless carriers. And where Android's presence is "still in its infancy."
"For Microsoft, Nokia is bringing on board [to Windows Phone 7] the carriers," says Bokun.
Smartphones are more prevalent in Western Europe than in emerging markets. Currently, in the five biggest countries, 40% of consumers with smartphones have Nokia phones, according to Bokun. She expects a 10% decline in Nokia's share of this market in 2011. "But it will be compensated for in 2012," she says. "Nokia has traditionally been an extremely favored brand in Europe. ... Based on our talks with [mobile] operators, and past history, Nokia phones are almost idealized."
In Latin America, according to Bokun, mobile operators are mainly concerned with handset price. "What our analyst was told is expect to see very aggressive Microsoft-Nokia products in terms of price," Bokun says. "If operators are telling this to us, then it's probable they have already talked about it with Microsoft and Nokia."
The one market where these advantages are missing for Nokia and Microsoft is North America. The compound annual growth rate from 2010 to 1015 for smartphones is slower here, at 17%, than for other markets (35% for Latin America). But in that period, Pyramid forecasts 750 million smartphones will be bought.