Research Firm Says Windows Phone Will Take Hold, but Can Forecasts Be Trusted?

By Sterling Wong  JUN 05, 2013 3:57 PM

Microsoft will become a major player in the smartphone market by 2017, says one firm.

 


Microsoft (NASDAQ:MSFT) received a boost this week as research firm Canalys released new estimates that showed that Windows Phone could nab 12.7% of worldwide smartphone shipments by 2017.
 
In four years’ time, Canalys projects in its report, Android (NASDAQ:GOOG) will remain the dominant smartphone player, with a 67.1% share of the market, compared to 67.7% in 2012. Shipments of Android smartphones will climb to over 1 billion units annually from 470 million in 2012. Apple (NASDAQ:AAPL) will drop from 2012’s 19.5% share to 14.1% but it will still stay in second place.

"Apple's growth will be curtailed by the fact that momentum in the smartphone market is coming from the low end, and Apple is absent from this segment," said Canalys analyst Jessica Kwee in a statement. It appears, however, that Canalys did not factor in the possibility of Apple releasing a cheaper iPhone later this year in its forecast. "Android's continued dominance is due to the scalability of the platform," continued Kwee.

Microsoft, meanwhile, will eat into Apple’s share and grow fivefold from last year’s 2.4% share to 12.7% in 2017 to take third place, thanks chiefly to the popularity of Chinese companies like Lenovo (OTCMKTS:LNVGY), Huawei (SHE:002502), and ZTE (SHE:000063), predicts the UK-based firm.
 
"Nokia (NYSE:NOK) is the most active vendor in the Microsoft camp and it continues to make steady progress with its Lumia portfolio," said Kwee. "But longer term, it is the Chinese vendors that are best placed to challenge Samsung's (OTCMKTS:SSNLF) market dominance. Microsoft already has a relationship with Huawei and ZTE in the phone space, and Lenovo is a major partner in the PC space. These partners will be needed to help deliver the scale that Microsoft needs."
 
The Chinese firms will lead in releasing affordable Windows Phone devices that will be Microsoft’s engine of growth in emerging markets where millions of customers are just beginning to upgrade from feature phones.
 
"Windows' strength appears to be the ability to attract first-time smartphone buyers, upgrading from a feature phone. Of those who changed their phone over the last year to a Windows smartphone, 52% had previously owned a feature phone... with over half of the US market still owning a feature phone, it's likely that many will upgrade over the coming year, which will ultimately contribute to more growth for the Windows brand,” noted Kantar Worldpanel ComTech analyst Mary-Ann Parlato in a recent report, according to Computerworld.
 
There is also good news for beleaguered BlackBerry (NASDAQ:BBRY): Canalys says that the company’s market share will stay stable over the forecast period, even though its smartphone shipments will actually double in the next four years.
 
Of course, Windows Phone or BlackBerry enthusiasts should take Canalys’ report with a huge grain of salt, as they should with any forecast, since they can differ from the actual outcomes drastically.
 
Take, for example, a 2012 report by IDC. In 2011, the firm estimated that by 2015, Windows Phone would actually be the No. 2 operating system after Android, thanks to a successful Windows Phone 7 partnership with Nokia. Clearly, that did not turn out to be the case.
 
IDC also did not foresee back then that BlackBerry’s share would drop the way it has in the past two years. The firm forecast a 13.7% share of the smartphone market for BlackBerry come 2015, which is not impossible, but it would require the Canadian company to engineer one of the greatest turnarounds we have ever seen in the industry.
 
In short, the smartphone market changes rapidly and it is extremely difficult to predict how the market will look like in the future. After the Motorola (NYSE:MMI) Razr and the iPhone, we should know that any one of the major companies, or even a young upstart, could release a paradigm-shifting product that could upend the entire market -- and we would not have even seen it coming.

Twitter: @sterlingwong

Disclosure: Minyanville Studios, a division of Minyanville Media, has a business relationship with BlackBerry.
No positions in stocks mentioned.

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