iPhone 5 Memo to Nokia and Research-in-Motion: There is No Ribbon for 10th Place
Jonathan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the movie Meet The Fockers, Dustin Hoffman brags about his son’s childhood awards to the soon-to-be father-in-law, Robert De Niro. As De Niro scans the bulletin board displaying the ribbons, he notices awards for "Team Spirit" and "Participant," among others. Robert De Niro then casually exclaims to Dustin Hoffman, that, "I didn’t know they made ninth-place ribbons." To which, Hoffman, ever the proud parent, replied, "Oh, they have them up to tenth place."
For mobile phone sales, even that does little good for Nokia (NYSE: NOK) and Research In Motion (NASDAQ: BBRY). Below is the list of the ten best selling mobile phones currently for Amazon:
1) Samsung Galaxy SIII blue sprint
2) Samsung Galaxy SIII blue verizon
3) Samsung Brightside
4) Motorola Droid Razr
5) Samsung Galaxy SIII white verizon
6) Samsung Galaxy Nexus 4G verizon
7) LG Expression AT&T
8) HTC Evo 4G Sprint
9) Samsung Galaxy SIII Blue AT&T
10) Motorola Droid 4G Verizon
Not a single Research-In-Motion or Nokia product would even get a ribbon for tenth place in that ranking. This situation will only get worse come September 12, when the iPhone 5 is unveiled by Apple (NASDAQ: AAPL). Also coming out soon will be the new Galaxy Note from Samsung, with the Google Android operating system. Amazon is widely reported to be coming out with a Kindle Smartphone. But it will be the iPhone 5 introduction that will do the greatest damage, by far, to what is left of Research-In-Motion and Nokia Corporation.
According to Peter Misek, an analyst with Jeffries, an investment firm, the launch of the iPhone 5 “will be the biggest handset launch in history.” According to Misek, there will be 170 million global subscribers coming out of contracts in the second half of 2012, and another 450 million in 2013.
In addition to the iPhone 5, many are expecting a smaller iPad, now dubbed the Mini, from Apple in time for holiday sales. Recently, Google launched a 7-inch tablet, the Nexus 7. There is no such anticipation for any new products from Nokia Corporation and Research-In-Motion, contrast. The introduction of the Lumia 900 smartphone by Nokia Corporation in the spring was a disaster. Prefacing the debut of the Blackberry 10 in early 2013 from Research-In-Motion have been a slew of negative reviews.
When the iPhone 5 hits the market, not only will it deny the high-end of the market to any products from Nokia and Research-in-Motion, but the lower segments will be further closed. The iPhone 4S, iPhone 4 and others will get cheaper. The cachet of Apple products will lure customers who cannot afford the top-of-the-line iPhone 5 into other versions. That is why Land Rover offers the Range Rover and the Discovery models, as an example. It is the same with Mercedes, BMW, Rolex and other high end companies looking to dominate across the market.
Around the world, particularly in China, the biggest market, the iPhone is at the vanguard of the smartphone marketplace in terms of desirability. That is not only true for the new versions, but also used models. About this, Israel Ganot, the founder of Gazelle, an electronics recycler, notes that, "There is insatiable demand for iPhones outside the U.S., mostly in emerging markets."
If there is any demand, anywhere, for Research-In-Motion and Nokia Corporation products it is certainly not showing up on the financial statements. On a quarterly basis, sales growth is down by 18.68% for Nokia Corporation. Over the same period, for Research-In-Motion, sales growth has fallen 42.67%.
The investment community certainly does not expect the introduction of the iPhone 5 to improve the outlook for Nokia Corporation or Research-In-Motion. Research-In-Motion has a short float is 20.32%. For Nokia Corporation, the short float is 5.36%. A short float of 5% is considered to be troubling for a company. Apple has a short float of 1.22%.
Evey iPhone 5 that Apple sells makes it that much more difficult for Nokia Corporation and Research-In-Motion to recover. The success of the iPhone 5 at the high end of the market does not up the more moderately priced segment to Research-In-Motion and Nokia, it will facilitate greater sales of the iPhone 4S and iPhone 4 by bargain shoppers who still want a version of the best. In the smartphone market, it is a zero sum game and there is no reward for the shareholders of companies that come in tenth place!
Fool blogger Jonathan Yates does not own any of the stocks mentioned in this article. The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services recommend Amazon.com, Apple, 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.
