RIM or Nokia: Which One May Have a Better Future?
Jay is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If either of the two struggling mobile phone makers, Research In Motion (NASDAQ: BBRY) and Nokia (NYSE: NOK), one day announces calling it quits, few would be really surprised. I’m not suggesting they will, as the two companies still have their chance to make it work before everything plays out. But after all, Motorola Mobility just lost its independence, even though it still holds the sales record for any single mobile phone model from its Razr’s successful multi-year run. Before merging with Google (NASDAQ: GOOG), Motorola Mobility tried fruitlessly to develop its own mobile operating system for smartphones so that it wouldn’t have to rely solely on the Android software. The issue of the smartphone platform, or the lack of one, in the case of Motorola Mobility may provide a cue for the future of RIM and Nokia.
Knowing what happened at Motorola Mobility, Nokia investors have their reasons to be nervous about their company’s future. Nokia has decided to abandon its own Symbian platform and become mostly reliant on Microsoft (NASDAQ: MSFT)'s Windows Phone. Such a strategy doesn’t seem to be giving the company much of a competitive edge. In the days of the so-called feature mobile phones, software didn’t matter much as mobile phone functions among different brands are all simple and straightforward. Better hardware design was the way to attract consumers and what helped Nokia to once become the world’s largest handset maker. But software has come to be the more important part of the mobile phone business after the market enters into the era of smartphones, and it’s critical that mobile phone makers can quickly transition themselves.
Nokia’s Symbian platform was largely the result of its acquisition of Symbian Ltd., with certain components licensed from third parties. The licensing aspect, however, prevented the platform from being a fully open source for all developers. Instead, Symbian's full source code was published on a restricted basis and limited to member companies only. With Nokia’s adopting Windows Phone and reducing the number of its smartphones running on Symbian, the already small Symbian developer base is seeing more developers leaving the platform. The result has been a negative feedback loop of self-defeat for Nokia.
Does anyone at Nokia wonder how Samsung has overtaken it as the world’s number one handset maker? Samsung doesn’t just get lucky by marching along with the steady Android; it still maintains its own mobile operating system, the Samsung Bada. The company just had its yearly Samsung Developer Day in Seoul, where the software has more recognition among the customers of its home country. I suspect that Symbian is also a familiar brand to consumers back in Europe, and it would make sense that Nokia kept the system for its home market. Nokia’s shares are listed in three stock exchanges, the NYSE, the exchange in Frankfurt and the one back in Finland. Investors here in the U.S. would be just as happy to see sales coming in from Europe if that‘s where the company could still win competition.
RIM, with its BlackBerry OS, on the other hand, seems to compare differently. The BlackBerry platform has had many evolving versions over the years, and the trademark used to be synonymous with smartphones until Apple introduced its iPhone and quickly grabbed the spotlight. The iPhone has more appeal to general consumers, while the BlackBerry traces its early dominance back to serving the working professional market. It could be a losing battle for RIM to continue its push into the general consumer market where competition concentrates and its product strengths, such as a secure email system and professional grade employee communication, don’t draw much attention from retail customers.
Desperate to regain its market share, RIM may have been marketing the right product to the wrong market. If the average consumers that RIM is going after care more about using their phones for games and Facebook, the company would have a harder time trying to build up better product recognition and a more loyal customer following. Alternatively, focusing on serving customers who use BlackBerry for work-related tasks, RIM could be in an advantageous position relative to its competitors. Unlike other smartphone makers that often leave user applications and support to third-party software developers and data managers, RIM has its own network of server infrastructure used to directly manage its signature e-mail and communication data services. Different from Nokia in particular, RIM controls both its own operating system and certain application software, a proven product strategy for a smartphone maker‘s potential success.
Investors, especially value investors, sometimes must decide whether a bargain stock is truly undervalued or just deservedly cheap. With RIM and Nokia both trading below their respective book value, only a careful business analysis will help evaluate which company is still worthy of investment at its current bargain market price.
JJtheArdent has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Nokia. 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.
