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We're Number 2! Nokia Is About to Lose Its Long-Held Smartphone Crown

Nokia (NOK) stock jumped a few percent on its better than anticipated results and news that it signed its formal deal with Microsoft (MSFT) to use Windows Phone. But with the good comes some bad. Nokia's earnings release quoted CEO Stephen Elop as saying, "Following a solid first quarter, we expect a more challenging second quarter." No kidding there, because the company will probably lose its long-held first place smartphone sales status this quarter.

This changing of the guard has been building for at least a year. Apple and the Google (GOOG) Android Collective have grown much faster than Nokia's platform, and continue to accelerate. Look at Nokia's sales numbers: 24.2 million converged mobile units, which is the company's term for smartphones, tablets, and other mobile computers. That was up 13 percent year-over-year.

iGadgets and Android on a tear
And Apple? It sold 23.3 million iPhones and iPads last quarter. You can't really compare that number to the same year-over-year period because the iPad hadn't started shipping. But iPhone unit sales alone jumped by 113 percent in the same year-over-year comparison and increased by 14.9 percent just from the previous quarter.

Google's hardware partners have been on as furious a tear. There is simply no way that Nokia can keep its lead, particularly as it won't have its new Windows Phone-based handsets out for many months. That will make the chances of the company recovering ground far more difficult.

Furthermore, Nokia has experienced significant price erosion in its converged devices, with average selling price dropping by 6 percent since the previous quarter, especially when Apple saw an increase of 2.3 percent. Were product in hot enough demand, it would command more money, not less, so there's a correlation between eroding prices and lower influence with business partners. And influence translates into attention that can translate into better sales opportunities with consumers.

Nokia is going to find the next few months difficult, indeed. By the time the company can get new products into play, it might be too late.


Image: Flickr user yeowatzup, CC 2.0.
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