Which Underdog is More Likely to Become a Top-Dog?

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The American audience loves nothing more than watching an underdog win. Wikipedia explains an underdog as a player whom no one expects to win and is the opposite of the top-dog. So, betting on the underdog automatically becomes risky. And, despite the odds, when the underdog wins the game and claims its position as a top-dog, it wins the crowd forever, creating an everlasting positive impression in their minds. In Rocky III (1982), when Rocky was defeated by a brutal challenger, Apollo Creed came to the rescue of the fallen boxer and offered to train him to regain his fighting spirit. And finally, when Rocky defeated Clubber Lang to regain his lost glory, the audience applauded and loved Rocky even more.

Similarly, this is also the situation for the smartphone space.  When it comes to smartphones, the only underdogs that come to mind are Nokia (NYSE: NOK) and Research In Motion (NASDAQ: BBRY).  Both players have been top-dogs in the past and have fallen from grace as new competition has replaced them. But, neither has given up. Being referred to as “have beens” of the past is not something they are going to accept, so their struggle for survival, growth, and success continues. Now, the question is, which of these players are more likely to become a top-dog? I personally feel Nokia has a better chance of success than its Canadian peer RIMM. Let me explain.

First, let’s take up Nokia. The timing couldn’t have been better for Nokia to launch its latest flagship device, the Lumia 920. The holidays are here and everyone is pumped up to celebrate the season with nice gifts and great food.  Apple (NASDAQ: AAPL) and Samsung have already launched their leading devices for the season and thus the Lumia devices will be in direct line of competition with those of the peers. So, what is it that will push the Nokia handsets towards success and better acceptance? Well, the answer is correct fundamental components – product, price, partnerships and place.

Nokia has made a smartphone that is better than the competition. The display on the Lumia 920 is 4.5 inches long as against the 4 inch display of the iPhone 5. Though the Galaxy S III has a 4.8 inch display, it is not much of an advantage as consumers may perceive the device to be a little too big for one-hand use. Thus, it seems the Lumia is designed with keeping the optimum size in mind. The Lumia 920 also sports a better camera, capable of clicking quality pictures even in low light conditions, with the highest imaging capacity among the comparable devices. Aside from these, the Nokia handsets have some very exciting new features. One such feature, for example, is the wireless charging facility. Nokia has never backed out from innovating and the consumers may find this latest innovation to be pretty interesting.

<img src="/media/images/user_13114/smartphones-comparison_large.jpg" />

(Source: GSM Arena – Lumia 920 Vs. iPhone 5, iPhone 5 Vs. Galaxy S III)

Next, the device has been priced very competitively. With a contract, the 32 GB Lumia 920 will be available as low as $100, compared to the starting range of $300 for the 32GB versions of the iPhone 5 and the Galaxy S III. Specifications wise, Lumia 920 is better than the iPhone 5 and almost at par with the Galaxy S III, but prices much lower than both the competing devices and this surely is a competitive advantage.

Nokia is also getting the assistance form a company as big as AT&T (NYSE: T). Recently, the second largest US telecom player announced that it will be offering the Lumia 920 for $99.99 and the Lumia 820 for $49, both with a two-year contract. Through this move, AT&T wants the device to receive wide acceptance and huge visibility. Although the move will hurt margins, the company has decided to go with quantity over margins. With time, as more and more consumers start using the Lumia devices, the demand will improve and the company will be in a better position to enjoy greater margins. Right now, the prime objective of Nokia is to capture the market. The wireless player is also interested in the device as it feels the success of this third ecosystem will help break the dominance of the Android and iOS ecosystem. As a measure to attract more and more customers, AT&T also started giving away free wireless charging plates and the response to the offer was so huge that the company ran out of supplies within a few hours. Another great partnership Nokia is benefiting from is that with Microsoft. The Windows maker is attempting to capture the mobile OS space aggressively and its marketing muscle will surely benefit Nokia also.

Nokia typically launches its devices in only a few selected countries at a time and then enters new geographic areas in the coming months. Because of this habit, Nokia has lost a few good opportunities in several countries, such as India. However, this time the Finnish phone maker has decided to make the product available in several countries simultaneously, including India. The company has a very strong fan following in the country and enjoys a market share of 36%, while Apple is struggling at a mere 4%. Nokia is also aggressively targeting the European markets. With strong presence in both these markets, Nokia’s effort to redesign the brand image and reposition itself in the minds of the consumers is likely to meet with success.

Now, let’s take a look at the BlackBerry maker. There’s not much happening news about the company at the moment. Management at RIMM is quietly waiting for the launch of the BB10 platform and the new superphones and currently is surviving on the low end Curve handsets and the BB7 OS. With each passing quarter, the phone maker is losing market share and presently accounts for only 4.3%, down from 9.5% in the prior year period. During the third quarter of 2012, RIMM shipped only 7.7 million BlackBerry handsets, suggesting a drop in the shipment volume of more than 34%. Currently the shares of RIMM are trading at $8.54, near its 52-week low of $6.22. 

<img src="/media/images/user_13114/chart-4_large.jpg" />

This, however, doesn’t mean that RIMM is not going to face a turnaround. Chances are there that once the BB10 is launched, the company’s shipments will improve gradually and the performance of the phone maker will improve. Over the past few weeks, even the stock has posted some decent performance. However, I feel, the improvement will not be very significant. One thing which should be kept in mind is, even after RIMM launches the BB10 platform, the desired success may not be experienced because of only one simple reason – absence of BlackBerry PC OS.

Apple and Microsoft are able to provide users with the experience of converged devices because of their respective common OSs across PCs, tablets and smartphones. But, even after the release of the BB10, the OS will be available in tablets and smartphones only. Here is the disadvantage the company is going to face. Some may say, even Android’s PC OS isn’t available and yet it is extremely successful. The point here is, first, Android is more affordable and secondly, Android rose to success when the concept of converged devices was not that relevant. A 2007-innovation cannot have the face the same amount of success in 2010 anymore, basically because technology has improved, requirements have changed and the market has become more matured. The success of a smartphone depends greatly on the success of the OS it is running and since Nokia comes with an OS with wider presence, not to mention ease of use and freshness, I feel it is more likely for Nokia to be the winning underdog than RIMM.

 # Movie description taken from IMDb website

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