Let's face it: The smartphone revolution hasn't been kind to every company that's been trying to make it out there. In recent years, the headlines have been dominated by Apple (NASDAQ: AAPL ) and Google (NASDAQ: GOOG ) for having the smartphone market locked down. Naturally, this incredible success came at the expense of other companies, having seen their fortunes dissipate in recent times. Back in the day, it was Nokia (NYSE: NOK ) that ruled the smartphone world with its Symbian mobile operating system, but once the iPhone caught the consumer's eye, everything started to change.
Enterprise-entrenched BlackBerry (NASDAQ: BBRY ) largely held its own in terms of market share until 2010, when enterprises began reducing their dependence on the company's enterprise-oriented solutions. At the time, the writing was on the wall that BlackBerry could be in trouble, which helped drive Apple's enterprise share to more than 50% today.
Although BlackBerry and Nokia have experienced their share of hardships in recent years, both come with an arsenal of new offerings hoping to change their statuses in the smartphone world. Which company has the best chances of success in 2013?
Since developed markets are more established for smartphones, Nokia will be primarily placing its focus on emerging-market growth opportunities. Considering that the world has only reached roughly 25% worldwide smartphone saturation, there's a tremendous amount of growth for companies that cater to less saturated markets. Not to mention that Nokia has aggressively priced its offerings to fare well when consumers decide which device has the best value for the price. Central to this strategy are the $180 unsubsidized Nokia Lumia 520 and the $249 Lumia 620, which together hold the potential to ruffle Android's feathers in the sub-$250 unsubsidized smartphone market. Until now, the sub-$250 Android smartphone market hasn't been met with any formidable competition. The hope is that Nokia's aggressive approach coupled with Microsoft's (NASDAQ: MSFT ) freshly minted Windows Phone 8 ecosystem will be enough to steal some thunder away from Android's stronghold.
Working from the high end down, BlackBerry has been in the process of (slowly) releasing its first flagship BlackBerry 10 phone, the BlackBerry Z10, into the wild. BB10 is built on an entirely new source code called QNX, which offers the promise of a modern-day mobile OS, coupled with the potential to act as a modern-day cross-compatible platform. BlackBerry promises QNX will one day connect with your car, home, and the health-care system from your device. The Z10 is also a sharp divergence from the traditional designs of the keyboard-entrenched device maker.
Ultimately, BlackBerry is planning on releasing six devices based on BB10 in 2013, split evenly between keyboard and touch models, covering a range of price points from the low end to the high. But considering the Z10 fetches an unsubsidized $599, BlackBerry is a few steps behind Nokia in terms of tapping emerging-market growth opportunities with a modern-day mobile OS.
Although BlackBerry's enterprise position has been under pressure lately, it hasn't stopped the company from boasting about how more than 3,500 enterprises and government agencies are currently evaluating BB10 for future use. The thinking is that if BlackBerry can catch a few whales, investors could see it as a huge victory. Since Nokia can't fall back on these sorts of deals, its approach is more grassroots-driven in terms of growing market share. And you'd better believe that BlackBerry is working furiously behind the scenes to catch a whale of a customer. Last week, the company announced that it received an order for 1 million BB10 devices, the largest order in the company’s history.
But what really sets BlackBerry apart from Nokia are the highly profitable service fees it receives from customers who want enhanced security. However, with the transition from BB7 to BB10, service fees are likely to be reduced for customers who opt out of enhanced security. In other words, investors banking on service fee growth may be in for a bad surprise.
No cut-and-dried answer
I wish it was as easy as saying BlackBerry or Nokia has the absolute best chance of success in 2013, but it's not. Both companies have their share of advantages and disadvantages, which ultimately muddles investor thinking here. I can say, however, that both companies are starting from essentially zero, and both have taken a slightly different approach to their growth strategies. In terms of timing, investors have effectively grown bored of Apple's offerings, which has created an opportunity for both of these companies to wow investors with exciting new products.
Nokia is fully embracing its emerging-market growth opportunity with the introduction of a smartphone that has the potential to be an Android killer, where BlackBerry will probably be doing what it did best: attacking the enterprise market. With more than half of Nokia's device revenue coming from feature phones, the company still has its fair share of challenges to deal with. On the other hand, BlackBerry has to go at this alone, where Nokia has a deep-pocketed partner like Microsoft to lean on for support.
If I had to boil it down to one factor, I think the company that ultimately fares the best in emerging markets will be the one that has the best chances of future success.
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