It's Time for Another Cell Giant to Take a Turn in the Barrel

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

Apple (NASDAQ: AAPL) has seen its shares trade well off of their highs. Now Samsung (NASDAQOTH: SSNLF) shares are falling on weak sales of new phones. In mature markets, market share fights can be ugly and, in the end, can leave everyone hurting.

Complete Misses

Nokia (NYSE: NOK) was probably the first cell phone giant to feel the hit of the smartphone revolution. Only the company's failing wasn't weak sales of a new smartphone, it was pretty much missing the revolution altogether. That's left the company in rough shape and forced it into a partnership with Microsoft because it couldn't build both desirable phones and a desirable smartphone operating system.

Nokia's revenues have been falling since 2007, and it lost money in each of the last two years. To add insult to injury, not only have the shares fallen dramatically, but the company eliminated its dividend to help shore up its finances. Its partnership with Microsoft has resulted in a decent phone, the Lumia, but it hasn't been enough to turn performance around. Investors should continue to avoid the shares.

Research in Motion...or Not

BlackBerry (NASDAQ: BBRY) helped to create the smartphone revolution with its email-enabled phones. However, the company insisted on trying to do everything itself and didn't keep up with changing technology. That allowed new entrants to steal its customers. In a little over five years, the shares have cratered from around $140 to about $10 a share.

It's back with a new phone, the BlackBerry 10, but initial sales results aren't living up to analyst expectations. Investors should avoid the company. Over the last two years, BlackBerry's revenues have fallen from nearly $20 billion to $11 billion. It lost almost $1.25 a share last year and posted another share net loss in the first quarter.

Losing Faith

Apple shares have fallen some 40% from their late 2012 high. That's a huge decline that's mostly a result of investors having bid the shares up too far too fast. However, there are legitimate concerns that led to the market's change of heart. For example, with mature markets becoming increasingly competitive, the company will either need to find a large new source of customers or bring out some impressive new technology.

Neither seem to be in the cards right now. So despite the top-line growing from $6 billion to $156 billion over the past ten years, investors are rightly looking to the future with concern. That said, the market tends to overshoot on both the upside and downside. Apple shares now trade with a price to earnings ratio of around 10 and sport a yield of about 2.9% or so.

And, the company remains wildly profitable, posting earnings of over $10 a share in the first quarter. So even if the company's growth slows or stalls, there's still a lot to like here. The yield also provides a floor under the shares. Looking to the future, Apple is working on cracking the Chinese market, looking to introduce cheaper phones to reach less affluent customers, and is still working on new gear.

Growth, income and value investors should consider Apple shares now that they've had their turn in the barrel.

Repeat Performance

Now Samsung is getting its chance to get roughed up in the barrel. According to Bloomberg, the company's market cap fell by an amount equal to the entire market cap of Sony in just one month. While Sony has been struggling to keep up on the consumer electronics front in recent years, that such a comparison can be made suggests that Samsung's share price has gotten ahead of itself.

That's changing fast, however, as Samsung's new phones and tablets are missing analysts' sales expectations. That's a sign that growth is going to be harder to come by in mature markets. Moreover, Apple is staring to look for ways to replace its reliance on Samsung for key cell phone parts. A clear demonstration of the increasing competitiveness of the industry. Although Samsung is a leader in the mobile space, investors have realized that it won't be able to grow to the sky anymore than Apple could.

Although the top-line has more than doubled over the last five years, Samsung is facing headwinds that could curtail that. The shares fell over 12% in June, but there could still be some downside since the decline has really only just begun. Investors should probably avoid the shares for now.

Increasingly Difficult

The cell phone market is getting increasingly competitive, which increases the risks of investing in the space. Samsung is the one taking it on the chin of late, but Nokia, BlackBerry, and Apple have all had their turns. Of this quartet, Apple is the only one that seems like a decent investing option today.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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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