These Turnaround Companies Are Safe Bets
tarun is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
BlackBerry's (NASDAQ: BBRY) revenue and stock price took a steep fall in 2010 when its competitors Apple and Samsung (NASDAQOTH: SSNLF) gained more acceptance and ate away its market. Over the last nine months, the share price has almost doubled from $6 to $12. And that's because of the introduction of new smartphones equipped with a new operating system, as well as the company's robust balance sheet.
Currently, the company has two very attractive smartphones, the Z10 and Q10, which boosted the company's sales figures. The Z10 is a touch screen smartphone and was launched with the new OS, BB10. The phone’s success can be judged by the fact that its sale in the current quarter is expected to be around 4 million units.
The Q10 has revived the QWERTY look for which BlackBerry has always stood apart. Since its launch just over a month ago, over a million Q10 phones have been sold. The number is attractive, as the phone was launched mid-way through the quarter, in a few countries, and only last week was it released in the United States.
Apart from phones, BlackBerry also holds a portfolio of about 7,600 patents. These patents are estimated to be valued around $1 billion to $4 billion depending on the analyst. Scotiabank, being one of them, values the patents at $2.25 billion.
Aside from patents, the entire balance sheet looks very strong. The company’s net assets are worth $9.5 billion, which even exceeds its market cap of $7.4 billion. Its current liabilities are also well financed with a net working capital of $3.4 billion. Further, it has no debt on its balance sheet. So it appears as long as the phones sell, an investment in BlackBerry appears safe from any big downside risk.
Secure enough for the President
BlackBerry's phones have been primarily known for the level of security they offer, which is evident from the fact that even President Obama uses it. It just needs to focus attention towards its enhanced security features to keep the enterprise and government employees attracted to its products.
BlackBerry needs to keep adding more products to maintain the momentum it has generated from the Z10 and Q10. And it's set to release its A10, the company's second flagship touch screen release this year and possibly another major sales driver.
Another revival in the making
Nokia (NYSE: NOK) was once the global leader of the mobile industry with a 40% market share. But like BlackBerry, it too was late responding to the shift from feature phones to smartphones.
Lately, Nokia's Lumia series has gained momentum as it offers phones at almost every price range. Currently the company is focusing on a mid to low range Lumia 700, 600, and 500 series in the European and emerging markets. The company’s success is evident from the fact that it now has over 80% of the small but expanding Windows Phone market.
Lumia weak in the U.S.
Nokia has not been able to gain share in the U.S. with its Lumia phones. In its attempt to better penetrate the U.S. it has been trying to add more carriers for its products. For the first six months of the model's existence, it provided AT&T with exclusive access to the Lumia 920. Now it offers a slightly differentiated Lumia 928 and Lumia 925 to Verizon and T-Mobile.
In developed markets such as the U.S., carrier subsidies drive phone sales, which makes the relationship between Nokia and the carriers very important for its future success. Further, if rumors are true, on July 11th the Finnish handset maker, has another launch event in which it might come up with a new device that promises to "reinvent zoom".
It won't be the first time Nokia would revolutionize its phone’s camera experience, as it had launched a 41 MP camera 808 PureView device last year. The device, beyond doubt, is a stand apart piece from camera technology, but its outdated Symbian OS was the reason that neither the company nor carriers showed interest in marketing it.
However, the present scenario is more in Nokia's favor as its Windows phone is gaining traction and a more updated OS should attract customers. A high-end PureView innovation would definitely give the Lumia phones an edge over the Android and the iOS by sporting a feature its competitors couldn't match.
JV segment up for grabs
The Nokia-Siemens telecom equipment JV, has been troubling the company for some time now and it has been looking ways to exit the segment. In order to sell its stake in JV, it has invited Private Equity groups. Blackstone seems to be a potential buyer. It has also been reported that the company might be looking at the possibility of coming up with an IPO in an effort to rid itself of its stake.
Though Nokia believes in the potential of JV, the telecom equipment business is highly competitive and the company lacks the financial resources to own it completely. Therefore it thinks the best option may be to divest. The sale of its stake would free resources for the company to focus on its core mobile business and strengthen the balance sheet by almost doubling its cash position.
Nokia's camera competitor
Nokia is working hard on camera quality to differentiate its smartphones, but Samsung too is catching up with its Galaxy S4 that has a 13 megapixel camera. The phone also has a dual shot feature which helps you take pictures and videos from both the front and back of the phone simultaneously. Dual Shot gives tourist snaps and party shots a more personalized look especially when you self click it.
Further, Samsung is releasing a Galaxy S4 Zoom, a variant of its flagship Galaxy S4 smartphone. The new variant will have a 16-megapixel digital camera, with features an optical image stabilizer, xenon flash, and a 10X optical zoom lens for a better picture experience. The Galaxy S4 Zoom has a feature zoom ring which can instantly take and share a photo while you are actually on a phone call.
Apart from high end camera phones, Samsung has penetrated the lower range market too. It's the most sought out smartphone company in emerging countries with devices at almost all price points. Samsung has delivered an exponential growth in earnings over the last three years to just over 35% and revenue growth of around 10%.
Nokia and BlackBerry have both been performing well since their turnaround, and they have great support with a lot of cash on their balance sheets. Their stock prices have been very low and downside is limited as they have been trading near their book value. Both of these companies have the potential to give you a good return on your money.
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