Friday, August 3, 2012

AAPL, NOK, QCOM Tops in Barclays Smartphone Outlook

Barclays Capital analyst Jeff Kvaal this afternoon offers up some thoughts on the smartphone market, and mobile, more generally, in advance of the Mobile World Congress trade fair commencing February 27th in Barcelona, Spain.

Kvaal cut his overall handset unit shipment forecast for last quarter and for this year and next year, based on his expectation that feature phones are in the process of a long-term decline at the hands of smartphones, and to account for lower sales of Nokia‘s (NOK) older phones based on “Symbian” and lower sales by Research in Motion (RIMM).

Kvaal’s overall handset forecast this quarter falls to 436 milion units from 443 million, while this year is cut to 1.7 billion units from 1.75 billion, and next year’s is cut to 1.84 billion from 1.88 billion. His smartphone estimate this quarter rises to 155 million units from 151 million, while his estimate for the year goes to 660 million from 669 million and his 2013 view goes to 862 million from 845 million.

The feature phone market peaked at 1.14 billion units shipped in 2010, dropping to 1.11 billion last year. He thinks it’ll drop another 6% in 2012.

As for smartphones, the middle of that product category in terms of price is rising: ‘While the overall unit volume of the market is close to expectations, the mix has shifted materially. Smartphones represented 35% of the market in 4Q11, up from 22% in 4Q10. This increase is primarily a function of growth in the mid tier smartphone market. Nokia shipped nearly 90 million Symbian phones in 2011 � few if any of which sell for more than $300. The year also saw the emergence of Huawei and ZTE as meaningful players in the smartphone market. This was aided partially, though not exclusively, by strength in the China smartphone market. The Chinese carriers are increasing the amount of handset subsidies they are offering to the benefit of Chinese brands and the detriment of Nokia, among others. Huawei and ZTE�s success, however, is broader than their domestic markets.

Wireless chip vendor Qualcomm (QCOM) is doing well because average selling prices are holding firm or even rising, he writes. Qualcomm could deliver EPS of $4.10 to $4.20 this calendar year. That would be well above the $2.79 cents the street is modeling for the four quarters of 2012.

Nokia, on which Kvaal has an Overweight rating and an $8 price target, is being valued based on further downside, with investors failing to value the recovery.� “We continue to see Nokia working through its difficult transition and expect estimates to bottom in early 2012 before improving later in the year.”

But the overall trend, as Kvaal outlines it, is Apple (AAPL)� and Samsung Electronics (SSNLF) gaining share and everyone else trying to cope with that:

The clear conclusion from 4Q results was that Apple and Samsung continue to extend their lead at the head of the smartphone charts. Even recently strong challengers such as HTC faded in 4Q, while Nokia, RIM, LG and Sony Ericsson are struggling to mount recoveries.� Huawei and ZTE grew rapidly last year, primarily in their home market but exports also grew strongly. We continue to expect that Apple and Samsung lead the way, particularly at the high-end, but can any challenger emerge? We think the combination of Nokia and Microsoft is beginning to gain momentum and expect Windows Phone volumes to build steadily through 2012, although we only forecast that Nokia garners 10% smartphone share, well below its prior peak. We look for updates from the myriad players in the Android camp at Mobile World Congress in two weeks, in particular around Ice Cream Sandwich/Android 4.0. Finally, we believe the delay until RIM launches BB10 leaves it with a sizable hole in its portfolio.

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