Why I’m more bullish on Windows Phone than IDC is

Research firm IDC shared its five-year smartphone forecast on Wednesday and you can probably guess the ending of that story. The firm says Android(s goog) will dominate with a 77.6 percent market share by 2018, with Apple’s(s aapl) iOS share dropping slightly to 13.7 share and Windows Phone(s msft) nearly doubling thanks to BlackBerry’s(s bbry) losses. That all makes sense, but one other thing in the IDC data doesn’t, and it has to do with the fastest growing market segment: Budget phones.

When it comes to the low-cost phones that will account for the most sales in the coming years due to high-end smartphone saturation, I get lost in IDC’s logic. The firm says:

Android has been, and will continue to be, the platform driving low-cost devices. ASPs of Android smartphones were well below market average in the first quarter of 2014 and are expected to be $254 for full year 2014, dropping to $215 in 2018.”

That part makes sense, as low-cost Android phones can sell well in regions where consumers can’t afford to spend $300 to $700 or more for a flagship smartphone from any company. Android isn’t the only budget game in town, though. IDC may be overlooking the solid experience an inexpensive Windows Phone can offer. And strangely, IDC even notes that the ASP, or average selling price, of Windows Phones is expected to be $214 by 2018, which is actually a dollar less than the company’s ASP prediction for Android phones.

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My thought: If the average selling price of a Windows Phone rivals that of, or is less than, an Android phone, it’s a good situation for Microsoft, which can take advantage of this growth market.

Granted, Motorola has shown that you can have a pretty good Android experience for $129 with the Moto E. But kudos to Microsoft and Nokia, which proved the same thing with last year’s Lumia 520. I bought one on sale for $40 off-contract and it’s a superb value. In fact, it’s the bestselling Windows Phone to date by many accounts. Nokia recently followed it up with the $159 Lumia 630. I anticipate an even lower-priced 530 is in the works as well. While Android 4.4 was re-written to run better on lesser hardware, Microsoft’s much improved Windows Phone 8.1 software works just find on my cheap Lumia.

Nokia Lumia 630

It’s good news for Microsoft that IDC foresees a market share increase from 3.5 percent currently to 6.4 percent in 2018. But I think it’s even better news that Microsoft can produce low-cost handsets that are very capable and appealing for the budget market — so much so that IDC might be underestimating just how much share Windows Phone can pick up in this segment. And if the company can exceed sales expectations, it could even help with its higher-priced phones as hardware partners and developers decide to put more support behind the platform.