Nokia's stock price crashed by over 10% on mixed Q1 2013 results. Nokia's Lumia range finally seemed to be picking up some traction, with 5.6 million shipments, but this was offset by Symbian shipments dropping to just 0.5 million. However, Nokia's feature phone business seems to be collapsing, showing a 30% sequential decline and a 21% annual decline. Using Nokia's announced figures, let's attempt to estimate their smartphone and feature phone shipments by region and gauge their smartphone migration efforts.
Inputs from Nokia's Q1 2013 Results: Smartphones & Feature PhonesThe performance of Nokia's Lumia portfolio was far above my expectations, as it showed 27% sequential growth with a modest sequential decline in ASP (to €182). Overall smartphone ASP still showed growth (to €191), as Symbian shipments were limited to high-end models (such as the 808 Pureview).
Interestingly, Nokia's has projected Lumia shipments for Q2 to be above 7 million. Given the launch of the Samsung Galaxy S4, the HTC One and the continued onslaught of cheap Android devices, I would expect heavy discounts in the coming months as Nokia attempts to hit that figure.
Meanwhile, Nokia's feature phone portfolio crashed to just 55.8 million shipments and the ASP declined to just €28. As I had predicted, shipments of Nokia's full touch Asha portfolio crashed by nearly 50%, thanks to low-end Android competition in emerging markets.
Shipments by Region: MethodologyNokia's quarterly results include the region-wise performance of its "Devices & Services" division, which includes both smartphones and feature phones. The region-wise data includes revenue, total shipments and overall ASP. Unfortunately, it does not provide a break-up of shipments between smartphones and feature phones, but using the inputs above, we estimate those figures.
The first step in this estimate would be to create a rough region-wise smartphone & feature phone shipment estimate, by using the global average smartphone and feature phone ASP with the region-wise revenue. However, since the actual ASP by region is likely to vary, this would give us a figure for total smartphone & feature phone shipments that are inconsistent with the announced figures. At this point, we can find a "best fit", i.e. optimal solution, which gives us region-wise shipments that match the total shipment figures (with the region-wise ASP being the closest possible fit with the global ASP for smartphones and feature phones respectively).
Smartphone Shipments by RegionUsing the methodology and inputs above, we get the following estimate for region-wise smartphone shipments:
The figures above seem to be consistent with Kantar's recent market share figures and Tomi Ahonen's thoughts. Nearly 50% of Nokia's smartphone sales seem to be from Europe, declining from more than 60% in Q4 (which I assume is Symbian-driven). The only other broad market in which the Lumia portfolio seems to have a significant presence is Latin America (~20% of Nokia's smartphone shipments). These markets and the ASP suggest that it is the mid-range Lumia portfolio that is driving shipment volumes.
The Lumia portfolio seems to have a very limited presence in China and the Asia-Pacific (apart from North America). While Nokia's shipments in China constitute roughly 15% of its total smartphone shipments, the size of that market implies that Nokia has an insignificant presence. This tells me that the Lumia portfolio is very weak in regions where low-end Android vendors have a strong presence. This means that any expansion efforts by Chinese vendors like Huawei, ZTE & Lenovo could be particularly dangerous for Nokia.
Feature Phone Shipments by RegionUsing the same methodology, we get the following estimate for region-wise feature phone shipments:
As expected, Nokia's feature phone shipments are concentrated in the Asia Pacific region (notably, India), but it has been absolutely decimated in the Chinese market. A sequential decline in Europe is understandable because of seasonal factors, but the seasonal impact on markets like Asia Pacific and the Middle East should be much lower. This suggests that migration from feature phones to smartphones is responsible for this decline. If this migration is to Nokia smartphones, the corresponding rise in ASP would be good for Nokia. Let's take a look at the state of Nokia's migration efforts in Q1 2013:
The chart above should be very disturbing for Nokia's investors. The proportion of Nokia's smartphone shipments, out of total shipments, is considerably lower than most estimates of the average smartphone penetration rate in every single region (except North America). This means that Nokia is probably losing a major chunk of its feature phone customers to competing smartphone platforms. Even if the Lumia business shows sustainable growth, the loss of Nokia's feature phone business should be a major blow to any hopes of achieving long-term financial stability.