BlackBerry Doubles Down on Market Growth

Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

There sure is a lot of action in the smartphone market these days, isn't there? It's almost like an entirely new market is suddenly taking the world by storm, and the big players are all trying to establish a position where they get to keep most of the money. Yeah, I think that sounds about right.

Which is where once-dominant and now-upstart BlackBerry (NASDAQ: BBRY) comes in. BlackBerry is hoping to get itself back in the game with a new phone and some new initiatives designed to reestablish itself as a serious player in the smartphone market. It's still up for grabs whether it can do it, but the company is impressing with its efforts.

At least it's impressing me. I think some in the media are holding it to an unrealistic performance level. When the Z10 came out a few days ago, the stories ended up being about how sales weren't up to the hype. That's more the fault of tech writers than BlackBerry. The only thing BBRY is guilty of is not complaining as people said good things about them. Then they sold 1 million of the things in a partial quarter and reporters said bad things. Then they reported earnings and came in at a profit for the second straight quarter.

It's a whiplash kind of year for the company.

Still, BlackBerry isn't sitting on one idea and hoping the media can carry it to glory. CEO Thorsten Heins announced that the next steps are a series of new phones at a variety of prices to recapture market share and to deal with an anticipated drop in subscription revenue. Someone's planning for the future. Good for them.

Apple (NASDAQ: AAPL)

To do that, BlackBerry will have to go through Apple, of course. The iPhone is still the most seen (if not the most used) phone. At a minimum, it's the most visible and distinctive. Still, BlackBerry knows it can't knock off Apple anytime soon. The goal is just to be acknowledged as playing in the same league.

Apple's stock continues to be a good buy for investors. Honestly, all the recent drop has done is make me more interested in it as an investment. Apple continues to be an innovating and profitable company, and the recent decline just makes it more affordable. I expect real growth over the next 12 months.

Google (NASDAQ: GOOG)

Google is barely in the hardware business, and therefore is at best a slant competitor for BlackBerry. Still, the fact that the company's Android operating system runs a lot of the phones that BlackBerry has to take on makes it a concern to the comeback kids from Canada. Google has the strength and technical chops to do anything it wants at this point.

In terms of investability, no one should take BlackBerry into account when deciding to invest in Google. The company is a good buy with a not-overblown P/E of $24.46 and an EPS of $32.47. It seems to be showing some price resistance at the $800/share level, but I'm assuming that will be overcome, and $900 is achievable in 2013.

Microsoft (NASDAQ: MSFT)

This is where we get down to it. Microsoft hasn't been shy about announcing that the target for the company is BlackBerry. The firm – in partnership with Nokia – is actively saying it wants be the dominant third player in the market and knows that BlackBerry is who it has to muscle aside. It might be able to do it with its deeper pockets.

I've long touted Microsoft as a mature tech firm that's worth investing in. It'll never go wild like Apple or Google, but it's a solid, reliable firm that pays a 3.22% dividend yield for investors who want to play the tech sector without the higher risks that generally accompany it. A good investment if your riskier or wilder money is elsewhere.

T-Mobile/MetroPCS (NYSE: TMUS)

Predicated on the merger of the two going through, the company that emerges could present a real challenge to BlackBerry. As mentioned above, T-Mobile is counting on ending the subscription-based mobile communications model and could lower income across the board for wireless providers. On the other hand, it could also help with phone sales if the new model takes off.

At this point, should the merger go through, the idea is to combine the two firms into a new publicly traded company through T-Mobile parent Deutsche Telekom. But that's downstream. If you want to invest in it you should pick up shares of PCS and hope the merger goes through. Careful, though.

At this point, I think BlackBerry is doing the things it needs to do. It's trying to ride a bit of media hype (and scorn) as it tries to win back the users that abandoned it while it wandered in the desert. I think it's worth investing in – provided you think it will hold on to the third place spot behind Google and Apple – for some cautious money. It's not the riskiest play an investor could make, but it's not the safest either. Still, I like what the firm is doing.

Good luck!

Follow Nate on Twitter: @natewooley

More columns by Nate Wooley:


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!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure