Apple Loses European Market Share, Cash Strapped Buyers Pass On iPhones

It seems the Euro crises could be causing Europeans to look beyond expensive iPhones, and opt for cheaper alternatives powered by Google’s Android. A study by the Kantar Group, a research firm based in London, revealed that Apple��s smartphone market share declined in France, Germany, Italy and Spain to name a few in the last few months. ^[1]

Our $503 price estimate for Apple stock is about 25% above market price.

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Apple��s loss is Android��s gain

According to the report, during the 12 weeks ending November month, Apple��s smartphone market share declined from 29% to 20% while it declined from 27% to 22% in Germany. ^[1] The iPhone 4S helped Apple gain market share in the U.S. and Britain, but significant market share loss in Europe should be concerning Apple. Weakening global economy and fear of recessionary environment coming back in the near future could make this situation worse for Apple. Android, on the other hand, continues to flourish and enjoyed a dominant market share of 61% in Germany with the Samsung Galaxy II, its flagship product.

What should Apple do?

Apple has traditionally maintained higher prices for the iPhone by leveraging its brand value and gaining maximum profits during the process. However, we believe that Apple could gain by showing some price flexibility on the iPhone 4S, especially for weaker economies such as Europe.

It would mean that it will have to compromise on relatively high margins, but! it woul d help Apple avoid market share deterioration. We believe that the continuous market share losses at the hands of Android could be detrimental to Apple��s long-term outlook.

Another initiative that Apple could take is to come up with a cheaper iPhone with lower specifications than the current iPhone 4S. Before Apple launched iPhone 4S, there were strong rumors that it would come up with two versions of iPhone with one better suited for emerging markets that are more price sensitive.

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Notes:

1. New iPhone? No thanks, say cash-conscious Europeans, Reuters quoting research firm Kantar Worldpanel ComTech as the source, December 22nd, 2011 [?] [?]

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