The Fight to Be #3 in Smartphones
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
So the battle for third place in the smartphone market is getting more and more crowded. On the heels of what appears to be the successful launch of BlackBerry's (NASDAQ: BBRY) Z10 comeback phone and Microsoft's (NASDAQ: MSFT) and Nokia's partnership in new phones, we now have a new player.
Sony (NYSE: SNE) isn't new to the smartphone game, of course. They've been a player for a long time. What's struck me as most interesting about the company's recent announcement concerning the Xperia SP and Xperia L smartphones isn't the phones themselves but the fact that the company says they're trying to become the #3 maker of smartphones in the world. By my count that's three firms, Sony, Microsoft and BlackBerry, who have all stated that as a goal recently. From the way the market is behaving there's no actual room at the top behind Apple (NASDAQ: AAPL) and Samsung.
Seems defeatist to me. Why play for third when you can build towards second or even first. Heck, it wasn't too long ago that BlackBerry was first. Anything can happen. Feh, or maybe it's just a matter of companies not trying to set expectations too high. Like a presidential candidate saying that even getting 1% of the vote would be a huge victory, if a company doesn't raise the bar too high anything looks like a win.
Anyway, the real takeaway here is just how crazy competitive the smartphone world is becoming. With the global market exploding and multiple big money players committing to their next generation of products it's going to be an interesting time for investors. What are you to do to take advantage of a developing – and somewhat unpredictable – market?
Sony's been in the smartphone game since about 2010. While it doesn't get talked about as much as the sexier players, the company generally knows what it's doing in terms of marketing it's products and has a solid international foothold. Combine that with the fact that it's using Android as an operating system and the app problem (not enough of them) isn't an issue.
One shouldn't invest in Sony just because of smartphones, though. The company makes a LOT of other consumer electronics hardware. Televisions, game consoles and such all backstop and provide a cushion should the Xperia push not pay off. The stock is up 72% since the first of December, though it's still down quite a bit from a year ago. Combine that with a declining dividend and it's shaky. Sony will be fine long-term, but I don't think it'll be smartphones that lead the turnaround.
Apple and Samsung are the reasons no one ever talks about taking over the top spot in smartphone sales. These two are so big that it's going to be a while – barring some sort of game-changing development – before anyone can reasonably make the statement “we'll be first soon” other than these two.
The biggest smartphone concern I have with Apple is whether there will continue to be a steady demand for new phones at the pace the company keeps releasing them. That applies to all companies in the market, of course, but Apple makes a big splash. I expect the lines to continue declining for release day events and sales to remain strong. In addition, I still think that Apple stock is undervalued and that a smart investor will get some while the media push is still undercutting it.
The comeback kid, BlackBerry has a lot riding on how well the Z10 does, both in the United States and overseas. BlackBerrys were once a de rigeur possession in the business world, and the company hopes to reclaim that aura of suit-and-tie required while also appealing to the casual user outside of North America. While some people seem to think very highly of the new phone, others think BBRY can't make it back all the way. I'm hopeful but agnostic. There are several obstacles in the company's way.
The firm's stock has been peaks and valleys since it started getting some media attention at the end of last year. Still, against all odds it's up for the last 12 months--not a lot, but up. And it's grown 138% since September. A lot of that is media hype but it's made some people very happy. Keep an eye on BBRY, and you should think of putting risky money into it, though not a lot of it.
Microsoft and Nokia are also battling (together) for third place with their new partnership. Microsoft is an easy company for people who believe in the whole mythos of the tech sector to write off. That's foolish. The company has a history of doing what it does well and without flash. Heck, there's a lot to be said for a tech company that doesn't center on one figurehead and instead behaves like a traditional firm.
The jury is still out over whether MSFT can make a strong move into the smartphone market. But the Windows 8 phone certainly looks good, at least at first glance. But whether Microsoft can leverage its existing business to bring the phones to the business world is yet to be seen.
Google (NASDAQ: GOOG)
And lest we forget, Google is still out there. No matter who wins in the race to be #3 in the smartphone market Google is out there supplying its Android operating system to multiple players. The tactic of being the providing instead of the manufacturer is a good one for the search company in that it positions itself to take advantage and profit no matter which one comes out on top. Sure, if in five years only Apple and Microsoft are standing Google will be sucking wind, but I don't expect that to happen. Google is a good investment for a number of reasons, and the smartphone operating system market is just one of them.
Follow Nate on Twitter: @natewooley
More columns by Nate Wooley:
- Apple, Google, BlackBerry and the Trends for Teens
- Can the PC Be Saved?
- Women in Power: CEOs in Defense, Technology
Nate Wooley has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. 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!