The Criticism Continues
Tedra is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the economy continues to sputter, people still seem to have money to buy mobile phones, no matter the costs. However, there at least two device makers they are not buying – Nokia (NYSE: NOK) and Research in Motion (NASDAQ: BBRY), and it is being seen in their continued decline in earnings and poor stock performance.
This past week, the makers continued to show just how undesirable they are to consumers. AT&T slashed the price of its cheapest flagship Lumina 900 in half from $99 to $49 over the weekend. This was particularly troubling considering all of the hoopla, effort, time and money that was sank into promoting the phone. It’s interesting that the decision was made to lower the price of the phone by such a large amount considering it was already one of the cheapest smartphones on the market.
However, in rolling out the phone, the entry did not go too well. All of the hype that went into introducing it months prior was doused when AT&T introduced it in major markets on Easter Sunday – a day when most stores were closed, leaving customers scratching their heads.
AT&T is not the only seller to have problems getting its latest smartphone to customers. Take Samsung (SSNLF) for example. When it introduced its Samsung Galaxy S III last month, the demand was underestimated. This also left Samsung’s customers angry and scratching their heads. The difference is that Samsung’s products are in demand, so people’s tolerance level for their delays can be higher. That’s not the case for Nokia, so it would seem that the “Go Lumina Team” would have avoided this kind of blunder.
Then there is RIM. Like Nokia, RIM used to be the best around. Its negative news has also centered on no longer being able to move its main seller, the Blackberry, in today’s highly competitive market. Last week came word that RIM will have to settle a $143 million lawsuit after being accused of patent infringement by Mformation Technologies.
RIM will also continue to suffer for failing to get its Blackberry 10 to market before the lucrative holiday season.
Blunders in producing devices customers are willing to buy are the Achilles heels for both companies and it reflects in their margins and other fundamentals. For example, RIM has an operating margin of just 5%, while Nokia’s is -2.8%. That compares to an operating margin of 36% from Apple (NASDAQ: AAPL)
Something else interesting I found about Nokia’s operating margin relates to the extent it is being hammered by Apple for mobile phones. Wraltechwire.com found that Nokia’s operating margin had plunged last year from more than 20% before Apple introduced the iPhone in 2007.
It can not be said enough that the domination of Apple and Google Android-powered devices are forces to reckoned with in the smartphone market. Their products are strong in consumers' minds, and that is why they thrive. Speculation abounds about which way Nokia and RIM will go over the next six months to a year. The major hurdles they face make the solutions needed even larger. Being acquired seems best, and hopefully both of these companies will find interested suitors soon.
TwillyD has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple, Google, and Nokia. 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.If you have questions about this post or the Fool’s blog network, click here for information.
