Smartphones to play an integral role in Microsoft’s growth
Key takeaways for investors from Microsoft’s 1Q15 earnings review (Part 3 of 14)
Exponential growth expected in smartphones
Smartphone sales in emerging markets are expected to grow at an exponential rate, while mature markets like the United States are expected to witness sluggish growth. According to Gartner, sales of basic smartphones are expected to grow by 50% in 2014, while lower-end phone units are expected to double.
There is a difference in growth for mature markets and emerging markets. International Data Corporation (or IDC) shared in a research report that mature markets are expected to grow at the rate of 4.9% in 2014, whereas the combined emerging markets are expected to grow at a staggering 32.4%. The report further states that by 2018, nearly 80% of the smartphones on the planet will be owned by customers in emerging markets.
Emerging markets provide growth opportunity for Microsoft phones
It is a common notion that developing markets will drive the growth in smartphones in the long run. Also, it is projected that premium devices will not have the same important position in the future as they enjoy today. The focus will shift toward low-end but capable handsets. The entry of Huawei, Micromax, and other new players that provide abundant features at competitive prices is a clear example of this shift. There is a strong possibility that Microsoft’s (MSFT) Windows Phone will find success in future emerging markets. The following are expected to push Microsoft’s OS onto a high growth trajectory:
Lower hardware requirements through the Nokia acquisition
Reduction in licensing costs
The addition of new original equipment manufacturers (or OEMs) and original design manufacturers (or ODMs) partners such as Lenovo (LNVGY) and LG (LPL).
Google’s (GOOGL) Android and Apple’s (AAPL) iOS lead the operating system market globally.
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