A Look at Three Smartphone Makers
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Once upon a time, most business executives walked around with a Blackberry. The company’s BBM service also made it popular amongst younger entrants into the work field as well, instant messaging like no other. Then, something happened and most people dropped their Blackberry’s instantly. What’s weird is that this period when the Blackberry was a dominant force in the smartphone market, isn’t exactly too long ago – a reminder that obsolescence can occur even within the span of just a few years.
But on Friday, Research in Motion (NASDAQ: BBRY) received a shot in the arm thanks to data released regarding sales. The stock price jumped 19% towards the end of the week. However, the company’s shares have lost almost half their value since the start of the year.
RIM reported sales of about 7.4 million units of its Blackberry handsets during the second fiscal quarter. Most analysts were expecting less than 7 million in sales. “We saw this as a good trade this week because estimates were so low and sentiment was so bad,” said Michael Genovese of MKM partners in an interview. While the fact that the stock price has increased is good, it seems to me that it’s only gone up mainly because of the fact that nobody expected too much out of it. Sometimes, I suppose it is good to be underestimated.
RIM has been struggling to regain market share in a space recently dominated by Apple (NASDAQ: AAPL) and Samsung phones running on Google’s Android OS. Despite the positives last week, sales are down 30% when compared to shipments in the same period of the previous year.
Investors had been expecting a flat quarter, but the Canadian company surprised with the news that 2 million subscribers had been added in the previous quarter. However the company has admitted that the pricing has been “aggressive.” Sales, though, have provided revenue of $2.9 billion as opposed to the expected $2.49 billion.
This is still however a 30% revenue drop, and people are only applauding because they expected a 40% drop. However, most analysts are aware that RIM is putting all its eggs in the Blackberry 10 OS which they believe is on track for its launch in early 2013. Much of RIM’s strategy depends on the Blackberry 10, which insiders hope will be able to compete with their newer rivals.
Meanwhile, let’s take a look at one of the rivals – Apple isn’t exactly setting the world on fire at the moment. The stock went above $700 earlier in the week, and then reduced among varied concerns. They’ve had some supply side trouble with their supplier Foxxcon’s plant in China being the site of a worker’s protest. Another factor that led to a dip in price is also the poor performance of the Maps App that was introduced in the latest iOS to replace Google Maps. This move sparked widespread criticism of Apple in tech circles.
Despite all of this, however, most analysts have retained their “Buy” rating on Apple. UBS has set a target price of $780 per share. Jeffries Group has maintained a “buy” rating on the stock and has matched Gene Munster’s target price at $900. BMO Capital has stuck by their “out-perform” rating and Topeko Capital has also stuck with their “buy” rating. Most analysts seem to expect the stock to climb, and climb to the $1000 mark fairly soon.
Since we’ve looked at an American and a Canadian company, let’s also take a look at a European company. Most analysts are looking at Nokia (NYSE: NOK) and are expecting the company to eliminate dividends. The Finnish company is burning $300 million a year from its slowly dwindling bank balance. The company has been paying a dividend since 1989, and even the break up of the Soviet Union, who purchased a lot of technology from Nokia, didn’t stop the company from handing out dividends.
Nokia will most likely kill their dividends for 2012, after slashing the rate of dividend by more than half since 2008, according to data compiled by Bloomberg. To maintain the present level, the company would have to shell out $964 million annually. If analysts turn out to be right, then the company risks alienating yield-focused investors, among all the other investors that they’ve already alienated.
All in all from a consumer perspective there's a lot of promise from both Apple and Nokia. Blackberry has a lot to figure out in terms of how to recapture their so called "Elite" crowd. Nokia is set to launch a series of phones with Microsoft playing a crucial role in it as well. Apple has already taken the market by storm, but yes there are disappointments in certain aspects of their new product the iPhone 5. To sum up, what we can expect as consumers is a break through in technology every time a product is launched by these smartphone giants.
ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. 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.If you have questions about this post or the Fool’s blog network, click here for information.