Does Apple Care if BlackBerry Fails?

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It has been no secret that BlackBerry  (NASDAQ: BBRY  ) is essentially facing a do-or-die situation with the release of the BlackBerry 10 OS and the Z10 smartphone. Having fallen from a position of complete dominance in the smartphone space, the stock has imploded, and sales have dried up. The new iteration of BlackBerries must bring the company back to a level of even fringe relevance, or it's not likely to survive.

While the greatest focus of BlackBerry's struggles to remain afloat are primarily focused on the competition for third place with Nokia (NYSE: NOK  ) , it's worth considering whether the demise of BlackBerry would be of any meaning to Apple (NASDAQ: AAPL  ) or even Google (NASDAQ: GOOGL  ) . In the long run, unless BlackBerry explodes back into the limelight, I do not see its existence having much impact on the big two; in the immediate-term, however, the interplay between BlackBerry and Nokia has some significance.

Might BlackBerry fail?
Initial reviews  of the new BlackBerry line have been mixed, but they have not been disastrous. As with any new product release, there are highs and lows; the general consensus seems to be that BlackBerry may yet have a chance. The biggest negative from the release was the fact that the new devices will not hit U.S. shelves until March .

Why Apple & Google might care
Given the relative market shares of the various smartphone makers, it would be easy to dismiss the roles of either BlackBerry or Nokia as essentially meaningless for either of the big two. According to research firm IDC, Android commands 68.3% of the global market, followed by iOS at 18.8% and BlackBerry at 4.7%. A different source has BlackBerry down to 3.4% in the fourth quarter, and under 2% in North America . After Apple, the other two make barely a ripple in the overall market mix.

The reason that the big two might care if BlackBerry is driven out of the market is that as long as BlackBerry and Nokia are fighting each other, that's where the conversation remains focused. Once the battle for third has been cleared away, it will be far easier to see real comparisons being made between the number three and the other two. Also, as soon as either Nokia or BlackBerry takes aim at Apple and Google, the push for features and functionality being developed by all three are more likely to see enhanced competition.

Another area of impact is with the wireless carriers. Under the duopoly model, subsidies have remained high, and control has rested largely with the manufactures . If the market is opened up into a three-way battle, the interplay with the carriers has the potential to change significantly .

Lastly, pertaining more specifically to Google is the fact that if Nokia becomes the definitive third player in the market, it may be better positioned to take on the cheap end of the smartphone market that Android thoroughly controls. While rumors continue to swirl about a cheap iPhone , Google owns this market segment for now. If Nokia, for example, can gain enough credibility to focus on competing up, the entire market dynamic may change.

Why Apple and Google ultimately won't care
Over the longer term, it should make very little difference to either Apple or Google who they have to compete with in the number three spot. There was little chance that the smartphone market was going to remain a duopoly forever. The fact is, by Apple's own admission, that China is becoming an increasingly significant driver of growth, and new players are entering the market from that part of the world means that things are in a state of significant fluctuation.

If either Apple or Google care about BlackBerry's demise -- which is far from being a forgone conclusion at this point -- it will be as an object lesson. BlackBerry once owned the market and fell out of favor for failing to keep up with developments in technology. The company is a cautionary tale of how to kill the golden goose.

The investment framework
The market was clearly displeased with the latest delays from BlackBerry in releasing the new Z10 in the U.S., and they showed that displeasure by driving down the stock on the announcement. I see little impact to either Apple or Google from the BlackBerry news, but Nokia definitely stands to benefit. If you're looking for a catalyst from the news, Nokia continues to look like the best bet at current levels.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there's a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy, and reasons to sell, Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 31, 2013, at 10:16 PM, prginww wrote:

    I had the opportunity to use the new Z10 this evening. I think it's a good device. If this phone would have come to market one year ago it would have been money. However, today I feel that it's not going to successful. It may save RIMM from failure but its not going change the company's position in the market. People are already in an developed ecosystem. I feel that RIMM is just too damaged, too weak and without ecosystem. As an Apple Bull I will admit that I did like the device although a few design aspects were flawed such as the location of the ports. RIMM did a good job of trying to copy the iPhone only the are half a decade late. I am long Apple.

  • Report this Comment On January 31, 2013, at 11:11 PM, prginww wrote:

    This is a really poor article, not surprised there. BlackBerry's new phone is much better than the iPhone and there is nothing Apple can do to catch up to BB. Apple will be closed out of Enterprise now, making their offering more of a toy and not a true business choice.

    How fast Apple has fallen in such little time. BB will take a huge amount of Apple market share now, sad really.

  • Report this Comment On February 01, 2013, at 10:34 AM, prginww wrote:

    "Having fallen from a position of complete dominance in the smartphone space, the stock has imploded, and sales have dried up."

    You obviously confuse the North American market with global smartphone sales... RIM has NEVER been in a position of "complete dominance"; the best position they ever had was number two behind Nokia. Nokia held the number one position until and including 2011. The highest global share RIM ever had was slightly above 20%.

    Neither Nokia, nor RIM will change the subsidy situation. People want iPhones and Android Phones (see OEM ranking below for proof), neither BB 10 nor WP8 offer anything that will change that.

    "The reason that the big two might care if BlackBerry is driven out of the market is that as long as BlackBerry and Nokia are fighting each other, that's where the conversation remains focused. Once the battle for third has been cleared away, it will be far easier to see real comparisons being made between the number three and the other two."

    This is also quite a bit off. Neither RIM nor Nokia are in the race for number three. This is the global ranking for Q4/2012:

    1. Samsung

    2. Apple

    3. Huawei

    4. ZTE

    5. Sony or Lenovo (unclear)

    6. Lenovo or Sony (unclear)

    7. LG

    8. HTC

    9. RIM

    10. Yulong or Nokia (Yulong numbers not available yet)

    So, calling RIM vs Nokia a "battle for third" is also quite a bit euphemistic.

  • Report this Comment On February 01, 2013, at 1:15 PM, prginww wrote:

    According to the Verge and other sources, Nokia may launch these devices as early as February at MWC:

    Lumia Eos (PureView camera phone)

    Lumia Catwalk (international flagship phone)

    Lumia Laser (Verizon flagship phone)

    Windows RT tablet (with added battery in the cover)

    Reasons why Nokia is more likely the third horse in the race than BlackBerry:

    1) Competitive prices (with those prices Nokia has already returned to profitability in the recent quarter).

    2) Ecosystem (Windows Phones, Windows tablets, Windows PCs, Xbox games, Xbox Music, Microsoft Office, SkyDrive and so on).

    3) Nokia´s exclusive innovations in Lumia phones

    (PureView camera technology, HD+ sensitive screen technology, advanced mapping platform Here and City Lens, free music with no adds, offline turn by turn GPS, rich sound recording etc).

    4) China Mobile and China Unicom are subsidizing Lumia 920/Lumia 920T for a 2-year or 3-year contract starting from 0 or 1 yuan.

    Beside price competition, Nokia has already partnered with the two biggest operators in China

    (China Mobile and China Unicom together have about 90% of all subscribers in China, and China is now the biggest smartphone market in the world because of the huge population).

    5) Nokia has been just voted as the most trusted brand in the world´s second largest country India, where Nokia´s Asha phones are also selling very well.

    6) Nokia Siemens Networks (NSN) has advanced and competitive technology to build LTE networks.

    When now Dows and S&P have hit all time highs, there are barely any cheap stocks than Nokia.

    Nokia which has come down 90% from its highest is a stock to consider,

    because it is extremely cheap and the reward can be one of the biggest in NYSE for the future.

    Nokia is a stock with great upside opportunity and why:

    1) Nokia´s bankruptcy is already remote.

    Nokia has increased net cash to about $5.7 billion.

    Nokia´s worst loss has been $290 million a quarter in 2012.

    Even with this kind of loss, Nokia could still deal by its own net cash for at least 4 years!

    2) Nokia won´t have to deal with that kind of loss in the future and why

    A. Nokia has cut cost expenses. The layoff in 2012 starts to be fully effective in 2013.

    B. Now Nokia has to pay royalty to Microsoft, but Nokia has patent incomes.

    C. Nokia has managed to make the important tough work for the basis of its new platform WP.

    Nokia has already sold over 15 million Lumia phones up to date (9.9 million units from Lumia debut till the end of September 2012 + 4.4 million units in the last quarter of 2012 + January 2013).

    D. Nokia has now a high end phone that can make "halo effects" and be compared to Apple´s and Samsung´s most high-end phone, the Lumia 920.

    The demand of this phone is still high in many countries around the world. The 4Q12´s Lumia sales did not include the sales of Lumia 920 in many countries, such as India, Asia-Pacific, UAE, Latin America, and many other countries around the world yet, because the phone was arriving these countries only starting from January 2013.

    Even in Europe, many countries start to get this phone starting 1Q13, for example the Netherlands announced the phone arriving in January.

    And China Mobile received only first lot of Lumias 920T around Christmas, the second and third lot and further have arrived China, and the phone is still selling out.

    E. China Mobile deal. When now, both China Mobile and China Unicom are subsidizing the Lumia 920 heavily, the 2-year or 3-year contract is starting from

    0 or 1 yuan, and considering only less than 1/5 of Chinese people are using highest-end smartphones,

    this will result into a huge number of 2-year or 3-year contract users for Nokia in China! Besides, 3G penetration in China is still very low, there is a huge opportunity there. Additionally, among the highest end phones, Nokia Lumia 920 is significantly much cheaper than for example iPhone 5 and Galaxy Note II. Nokia has an advantage in both the price competition and the biggest carriers´ backing in China!

    F. Nokia Siemens Networks (NSN). During these few months NSN has won many 3G and 4G contracts in many countries.

    According to NSN, they have network equipment that can boost the speed of 4G many times faster. This shows that, beside PureView camera technology, HD+ sensitive screen technology, advanced mapping platform HERE and City Lens, Nokia has also top innovations in building 4G LTE networks.

    G. MWC is coming soon. There are still more to come from Nokia.

    According to The Verge, Nokia will launch PureView camera phone, and also Lumia Catwalk (code name) and Lumia Laser (code name) for Verizon.

    According to CEO Stephen Elop, Nokia is also planning a lot of interesting things with Verizon.

    Nokia is likely launching tablet as well, even with some loyal fans of Nokia around the world buying some of Nokia´s tablets, this will be a good gain for Nokia.

    Nokia will launch more Lumia phones in the coming months to attract different consumer demands. More lower price-point,

    mid-range and high-end WP8 Lumias are to come.

    In 1Q13, beside Lumia 920 and Lumia 820 which are making their way to more markets and with better supplies, Nokia is also attracting the mass markets with budget WP phones Lumia 620 and Lumia 505.

    F. Asha phones. Asha phones are now selling almost 10 million units a quarter.

    Asha phones are affordable and competitive. Asha phones have now more and more smartphone features.

    Apart from features like Facebook, Twitter etc. Asha phones

    have internet access and access to thousands of Nokia´s most popular apps.

    Nokia has also brought an app called "Nearby" into Asha phones. Nearby is almost the same as City Lens in Lumia phones which is exclusive and unique in mapping and location data.

    There is still plenty of room for Asha phones to grow, because the price is competitive (cheapest android is right now about $100, while Asha is only about $70 without any contract).

    Apart from the features and price mentioned above, there are important and good selling points in Asha phones against cheapest androids, for example 40 free most popular games!

    Asha phones are still profitable for Nokia, because the OS is from Nokia itself, Nokia does not have to pay royalty for it.

    3) While bankruptcy is remote, Nokia´s stock price is still heavily undervalued.

    NYSE tech stocks are usually 2x book value, Nokia is still way much below that.

    According to Morningstar´s valuation, the sum of parts of Nokia (NSN, Navteq, feature phones, smartphones and patent portfolio)

    is worth much more than Nokia´s stock price right now, not to mention Nokia´s $5.7 billion net cash added to that value!

    Two years ago NOK was still about $15, now the stock is only over $4, the reason is that the stock has been over sold.

    Nokia is the most short sold stock in both Helsinki and New York! The shorts are still over 20% in Nokia´s total share number which is approximately 3.75 billion shares.

    This is a huge number, considering Apple´s short interest is only around 1% and Samsung´s around 2%. When Nokia is here to stay, the shorts need to be covered and the stock will skyrocket from these levels.

    Nokia Apple Intel Microsoft Cirrus Logic

    0.32 3.0 2 3.0 3.76

    Note that Nokia is currently selling at 0.32 price/sales ratio. This means that if the company manages to restructure and return to normal profitability, the stock has the potential to become a 10x bagger (even from today's price levels) - assuming the market will value Nokia 3.0x sales like Apple or Microsoft. But even a price/sales ratio of 2, like Intel has, means a 6x bagger from these levels.

  • Report this Comment On February 01, 2013, at 1:51 PM, prginww wrote:

    Lumia 822 popular among Verizon customers, grey and red versions sold out.

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