Are Samsung, BlackBerry, and Intel Doomed?
Alexander is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Smartphones can be messy, and not all device makers are properly positioned. With these three stocks, you can turn on the James Cramer sound board and start slamming the bear button. Or the Foolish can simply stay away.
Going forward, Apple (NASDAQ: AAPL) devices will continue to dominate and Android adoption will decrease dramatically. But don't take it from me--take it from the teenager who wants to make their next purchase an Apple device.
The biggest issue with Android is that only 21% of teenagers are making it their next phone purchase within the United States. 59% say they will be buying iPhones. So over the next 2-years it's highly likely Apple will be the reigning king with a younger generation.
In the United States, Apple’s products have the most appeal. The iPhone is perceived to be a superior device--everything about the product is designed to be simple, easy, and fun to use. The product's success is also driven by the product ecosystem. Users can access files and programs across all their Apple devices using apps and the iCloud.
Samsung (NASDAQOTH: SSNLF) is the only other company in the smartphone space generating any profit. June data from ComScore indicates that its market share improved slightly by 0.6%. With only 21% of teenagers willing to make the switch to Android, it's highly probable that Samsung’s market share will decline within the United Sates.
This will not be good as the United States is an important market and Samsung may not be able to offset the loss with emerging market growth. Worse yet, is that once a customer buys an Apple product, the same consumer will generally not switch to a Samsung device.
Android’s greatest weakness is that it’s a partial ecosystem. It works strictly in mobile, but it doesn’t really work as an extension to standard computing devices like Windows 8 and Mac OS X.
That being the case, Microsoft is not willing to release Office 365 onto the Android computing platform. This will alienate the office crowd (Office 365 is available on IOS and Windows 8), and will force an iPad, iPhone, or Windows 8 purchase.
Samsung still needs to operate its business at scale, so it can’t release a Samsung device using the Windows 8 operating system as only 5% of teenagers are willing to make Windows 8 their next phone purchase. Basically, Samsung’s phone business won’t effectively scale under Windows 8.
In other words, it seems Samsung is sitting on a shrinking island and it has no way of controlling the land mass of the island. Things are likely to get worse.
BlackBerry a disaster
BlackBerry (NASDAQ: BBRY) is a disaster in the making. Only 2% of teenagers will be willing to make the switch to this phone over the next two years. The company reported a 50% year-over-year decline in its device segment. In June, ComScore states the company’s market share declined by 0.8%. The new BlackBerry Q10 and BlackBerry Z10 were only able to slow down the loss of market share within the United States.
Here’s a quick example of bad marketing.
Currently Verizon is the largest mobile carrier in the United States. Verizon put BlackBerry’s next generation killer product at the very bottom of its smart phone section. This means that Verizon isn't focused on marketing BlackBerry’s products. What Verizon has towards the very top of the page is the Droid RAZR, Windows Phones (Nokia Lumia 928), and Apple iPhone.
Investors were hoping the product could gain some sort of foot-hold with a 50% increasing in advertising spend. But preliminary market share data already proves that the companies spending on advertising have not been able to off-set the loss of demand.
What’s worse is that the BlackBerry Z10 comes released with a lower screen resolution, weaker processor, and smaller screen size when compared to its nearest competitors (Samsung Galaxy S4, and Droid RAZR Maxx). There’s nothing about the BlackBerry Z10 or Q10 that specifically stands out.
Going forward it may be wise to avoid investing in this company. It’s a stock that’s sinking because of its weak product strategy, ineffective marketing strategy, and poor management. It's only a matter of time before some of the major telecom companies in the United States decide to drop the phone from distribution altogether.
Intel is getting massacred in mobile
Bench marks have surfaced for Snapdragon 800’s performance. The next generation Snapdragon graphics chip may stomp Intel (NASDAQ: INTC).
Ashraf Eassa from SeekingAlpha states that the next generation Qualcomm Snapdragon 800 is better by 71% in graphics when compared to Intel’s upcoming Z3770.
In the semiconductor space, the most important thing is designs wins. If Intel isn’t able to release a more superior processor it won’t sell. Samsung, HTC, and Motorola won’t go out of their way to ship inferior products by including an Intel chip.
Remember, the PC market is slowing so Intel needs to grow in mobile. Based on IDC forecasts, the PC market will only grow by 1.9% from 2014 on. The PC business is Intel’s most profitable business, and if its only going to grow by 2%, then Intel may have a problem. What’s worse is that the company is heavily burdened with fix costs from building out factories that are currently underutilized. Analysts expect Intel to report a 4.5% decline in revenue for 2013.
Both BlackBerry and Samsung will lose market share within the United Sates in the coming years, thus lowering profitability. The loss of profits should cause the stocks to fall. Intel is finding it difficult to crack the mobil market and is experiencing issues across all of its product segments. Perhaps its time to avoid Samsung, BlackBerry, and Intel. Perhaps Apple and Qualcomm are the way to go.
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Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!