Which Mobile Company Should You Pick?

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

Two former smartphone giants, Nokia (NYSE: NOK) and BlackBerry (NASDAQ: BBRY), have had a bad run in the last few years. Nokia, the company that invented the smartphone concept, was left far behind by Apple and Samsung in the smartphone race. The same goes for the once dominant BlackBerry, which has of late has realized that its lack of innovation has badly affected its fortunes.

The rise

BlackBerry can be said to be one of the biggest turnaround stories in the mobile industry in 2013. The company has released improved results and reported profits, contrary to everyone’s expectation. Its new BlackBerry 10 operating system and its new Z10 phone are certainly delivering results.

BlackBerry is assertively expanding its range of BlackBerry 10 apps, and presently has more than 100,000 apps compared to 70,000 when it was launched. Sales of the company’s new Z10 smartphone has bestsed the Street’s expectation of 915,000 phones, as over a million Z10 devices were sold since its launch.

The Z10 has performed very well, as its sales, even in emerging markets like India, have been very good. It has attracted more than half of its customers from other platforms, which speaks about the quality of the phone. Further, an order for a million devices from a single vendor indicates that BlackBerry’s revival is producing results.

The prospects

The company will be launching a set of new phones using its BlackBerry 7 OS, which I believe is a good idea as it will help it attract customers in the emerging markets. Furthermore, this strategy should not cannibalize the sales of its new BlackBerry 10 OS and Z10 smartphone, which would remain top notch in the eyes of its customers.

The Q10 is a QWERTY keypad-based smartphone that will be launched soon, and should attract many BlackBerry loyalists who are fascinated by the company’s keypad layout, as there is a dearth of smartphones with a keypad. The BB10 too has a lot of potential to deliver as the company has plans to launch it in another 30 countries. The company is increasing its marketing expenses 50% in the ongoing quarter to maintain the momentum of its current sales figures.

Another company trying a turnaround

Nokia’s phones dropped out of their market-leading positions once Apple and Samsung revolutionized the smartphone. Its Windows 7 phones have been well received, and are the fastest growing smartphones in the industry. Its sales might be small compared to other players but they are gradually improving.

The company, like Samsung, is trying to operate at a reasonable price point by introducing more pocket friendly versions of the Lumia series such as the Lumia 510 and 610. This strategy is smart, as Nokia has realized very early that its high end smartphones are not a preferred choice among customers; hence it is concentrating on low end phones. Moreover, the strategy should work well as there is going to be a major transition from feature phones to smartphones in emerging markets where people already trust the Nokia brand.

Nokia will benefit further by the increase in sales of the Windows Phone devices from Microsoft. In countries such as India, Poland, Argentina, Russia, South Africa, and Ukraine the shipments of Windows Phones have surpassed those of the iPhone in the fourth quarter.

In Italy, too, there is a sharp increase in the sales of Windows Phone, with 13.1% of the smartphones in the country running on Microsoft’s OS. The impending launch of Nokia Lumia 520 and Lumia 720 in the country should further improve the sales number. Nokia has seen increase in sales and now holds 5.6% of the market share in the UK as well. The Q2 numbers will clear all the air about the renaissance of Windows Phone, but the recent figures portend good things for Microsoft.

The better pick

Nokia is working hard to win back investors confidence and is seeing some success in its turnaround activities. Its strategy of targeting emerging markets with economical smartphones is delivering results for the company. On the other hand, BlackBerry seems to have more upside potential than Nokia for investors who are looking for a superior participation on mobile.

BlackBerry is improving, but if we are expecting a gain of 30% from an investment in the company, it’s bound to take a minimum of a year’s time, as the company has just started its turnaround activities.

ROUNAK KHEMKA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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