Cell Phone Wars: Three Ain't Easy

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

Both Microsoft (NASDAQ: MSFT) and BlackBerry (NASDAQ: BBRY) are vying for the number three spot in the mobile operating system space. Only one will win, too bad for BlackBerry it's taking shots from above and below.

Duopoly

When it comes to mobile operating systems there are really only two players right now, Apple and Google. Google has a much larger market share because it lets others use its OS to build their phones, while Apple doesn't let anyone share its highly profitable toys.

The duopoly has worked quite well, but Google appears to have manufacturing aspirations. That would put it in competition with its OS partners. This means there is likely to be plenty of room for a third player in the mobile OS space.

BlackBerry

BlackBerry was once the industry standard in smart phones. It was adored by millions who loved the convenience of receiving email on the go, a less novel feature today but revolutionary when BlackBerry phones were first introduced. The company, however, didn't change quickly enough as competition encroached and it rapidly lost market share as customers migrated to more functional, and cooler, phones from Apple.

BlackBerry is similar to Apple in that it tries to control all aspects of its phones, from hardware to operating systems. The new BlackBerry 10 is its effort to get back in the game, hoping that business customers will like it enough to stick around or, hopefully, switch back from earlier defections.

Nokia (NYSE: NOK)

Nokia has been struggling to regain its design chops for years, too, essentially giving up its once strong market position in developed markets as Apple and Samsung ate its lunch. Samsung uses Google's Android OS. Having given up its own OS, Nokia partnered with Microsoft to build the recently launched Lumia.

The phone has received decent reviews, though sales have disappointed some industry watchers. With a still material position in growing emerging markets, however, Nokia can easily remain an important industry player while being an also ran in some markets. Thus, the Lumia has showcased both Nokia's design prowess and the capabilities of Microsoft's mobile OS.

The Hits Keep Coming

The other industry players are adjusting to the new competition, with Samsung's recently released Knox security system taking direct aim at BlackBerry. The system allows customers to separate work from personal life on Samsung's phones, much like BlackBerry's Balance feature. With Knox, Samsung is going after the corporate market that has been the saving grace of BlackBerry's business. BlackBerry can't afford too many defections here.

Unfortunately for BlackBerry, Nokia's Lumia has some nifty business features too. Since the Lumia uses Microsoft's mobile OS, it is Microsoft Office friendly. Having native versions of Word, Excel, and PowerPoint may not seem like a big deal to non-business users, but these tools are vital assets in the corporate world. This problem only gets worse for BlackBerry as more manufacturers pick up Microsoft's OS.

Survival of the Fittest

With two material threats to its core business, the BlackBerry 10 has to be a home run for the company. If not, it looks likely to be squeezed out of its core market. Unfortunately, the company launched its new phone abroad before bringing it to The United States.

While foreign markets are a stronghold for Nokia, they aren't for BlackBerry. This could end up being a strategic misstep from which the company can't recover. At the very least, it risks losing the momentum from the new phone's launch when it, finally, hits the U.S. market.

Microsoft

It looks increasingly likely that Microsoft will crack the top three with its mobile OS. That's a good thing for competition, since it gives handset makers two OS options. With Microsoft's share price still at relatively depressed levels, investors can benefit too. Indeed, the mobile OS issue is part of the reason why the market is so down on the shares.

BlackBerry, unfortunately, is looking increasingly like a has been. Since the company is basically betting its survival on the new phone, most investors should sit on the sidelines until there is clear evidence of success.


Reuben Brewer 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!

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