Zacks Analyst Blog Highlights: Apple, Google, Microsoft, Nokia and Research In Motion

Mar 31, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 31, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Apple Inc. (Nasdaq: AAPL), Google Inc. (Nasdaq: GOOG), Microsoft Corp. (Nasdaq: MSFT),  Nokia Corp. (NYSE: NOK) and Research In Motion Ltd (Nasdaq: RIMM).

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Here are highlights from Wednesday's Analyst Blog:

Apple to See Increased Competition

Apple Inc. (Nasdaq: AAPL) will face rising competition in the smartphone market, not only from Google Inc.'s (Nasdaq: GOOG) Android-based phones, but also from Microsoft Corp.'s (Nasdaq: MSFT) Windows Phone 7, according to research firm IDC.

Android-based phones are forecasted to capture 45.4% of the market, according to the firm, while Windows Phone 7 will accumulate a 20.9% market share by 2015. Apple's iPhone is expected to be in the #3 position with a market share of 15.3%.

After a tepid 2009, the smartphone market seemed to turn around in 2010. Vendors shipped a total of 302.6 million smartphones worldwide, up 74.4% from the 173.5 million smartphones shipped in 2009.

Although smartphone demand is expected to remain robust, IDC believes that the growth rate will be approximately 49.2% for 2011, much lower than the previous year's growth rate.

Nokia Corp. (NYSE: NOK) continued to maintain its market dominance, with 33.1% of total market share in 2010. Research In Motion Ltd (Nasdaq: RIMM) was in the #2 position, with 16.1% market share in 2010, according to IDC. Apple was placed #3 with approximately 15.7% market share.

IDC expects Android-based smartphones to capture 39.5% of the market in 2011, while Nokia Corp's Symbian-based phones are expected to garner 20.9%. Apple's iOS-based iPhone is expected to gain 15.7%, while RIMM's Blackberry software is expected to gain 14.9%.

Apple is already up against strong growth from Android-based operating systems in the smartphone market, and the alliance between Nokia and Microsoft will be an additional headwind over the long term, in our view.

This is particularly true for those markets, where Nokia has a strong foothold, such as the Asia-Pacific (excluding Japan). In 2010, Nokia was the top vendor in the region with 53.7% market share, compared to Apple's 12.6%.

Although Apple gained some share in South Korea, Nokia's low-priced Symbian-based phones gained significant market share in the emerging markets of India and Vietnam. Nokia also holds a dominant position in the Chinese market with 50.3% market share compared to Apple's 6.2% in 2010.

IDC expects smartphone shipments to hit 137 million units in 2011, the first time for shipments to break the 100 million mark in the Asia/Pacific excluding Japan. Although Microsoft will not release its Windows Phone 7 until 2012, we believe Apple should prepare itself for a much larger battle against Nokia and Microsoft over the long term.

Moreover, a delay in the release of the next version of iPhone could also work against Apple in the near term.

Apple is also facing supply chain problems for the iPhone and the disaster in Japan has aggravated the situation. Global supply of NAND and DRAM, essential for smartphones such as iPhone has also been affected by production shutdowns in Japan, which is a significant supplier of these memory chips. This could temper profitability in the near term.

Recommendation

We believe Apple is well positioned to achieve strong top-line growth over the long term based on product innovation, strong sales from iPad and iPhone and helped by growth in Macintosh. We expect Apple to introduce new products in 2011 to compete against new Android-based phones and tablet PCs.

We maintain an Outperform rating on a long-term basis. Currently, Apple has a Zacks #3 Rank, or a Hold rating over the short term, reflecting near term concerns related to supply chain problems and uncertainty over new product releases.

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