Better Smartphone Comeback Play: BlackBerry or Nokia?

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: GOOGL  ) 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.

Source: Gartner.

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?

Nokia Lumia 620. Source: Nokia.

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.

BlackBerry Z10. Source: BlackBerry.

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.

Enterprise considerations
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.

Nokia's been struggling in a world of Apple and Android smartphone dominance. However, the company has banked its future on its next generation of Windows smartphones. Motley Fool analyst Charly Travers has created a new premium report that digs into both the opportunities and risks facing Nokia to help investors decide if the company is a buy or sell. To get started, simply click here now.

Read/Post Comments (18) | Recommend This Article (7)

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 March 17, 2013, at 1:23 PM, techy46 wrote:

    It's Android freeware against licensed software. It's kind of like WalMart against Kmart and Target. Consumer's have an insatiable appetitie for stuff at the lowest price attainable regardless of the unforeseen consequences. They've outsourced their jobs to fill those appetites. That's not good news for Apple, Dell, HP, Microsoft or Nokia. We could end up with 3 ecosystems each with 2 billion users or one with 4 billion users and the other two with two billion users each. Only time will tell.

  • Report this Comment On March 17, 2013, at 1:32 PM, Arthur1111 wrote:

    Sure, play down the BlackBerry comeback by comparing it to Nokia. The fact is:

    BlackBerry makes the hardware and operating system, while Nokia doesn't.

    BlackBerry controls its fate while Nokia doesn't.

    Blackberry is the most secure and has 80 million subscribers while Nokia doesn't.

    BlackBerry is a real threat to Apple and Samsung. Nokia isn't.

    Keep bashing BlackBerry. That is what you are good at. You have nothing to do with proper analysis

  • Report this Comment On March 17, 2013, at 2:16 PM, eidsonb wrote:

    Throw in the fact that Nokia has that DOG or as we say in the Southern US DAWG...of an OS called Windows Phone 8.... BB1o Bayyybe

  • Report this Comment On March 17, 2013, at 2:33 PM, jeffreber44 wrote:

    I choose Nokia over blackberry. The most innovative phone maker out there. Don't forget NSN and Here Maps.

  • Report this Comment On March 17, 2013, at 2:52 PM, sonbuster wrote:

    Google/samsung and apple are attacking BlackBerry relentlessly, because they know BlackBerry is a threat to their marketshare and global dominance.

    no one bothers with nokia/windows phone. i still havent seen any windows phone in public.

  • Report this Comment On March 17, 2013, at 2:54 PM, socialismrocks1 wrote:

    nokia will dominate-

    its a mid level smart phone with just a slight difference in performance of the high-end phones and is a third the cost

    i have had a blackberry-had a iphones and nokia's right now i have a samsung but my next phone will be a nokia

    nokia's do take a beating from users and keep working

  • Report this Comment On March 17, 2013, at 2:57 PM, Djag0909 wrote:

    Nokia's huge potential on its location and services sector they have a mapping business that can take on google,NSN is doing great and now no. 2 spot on network providers in the world,they are well positioned in the emerging markets and have phones on all price range not to mention its huge patent. Apple and Blackberry is paying Nokia for every phone they sell , so the more blackberry and apple sell, Nokia always gets a cut...but i hope they both succeed i am long bbry and nok.

  • Report this Comment On March 17, 2013, at 3:15 PM, criticalfool wrote:

    Elop is a spy for microsoft, microsoft will dump nokia like a flea. But yes nokia has other assets so nokia may give some returns but Blackberry is the one, 10 times price appreciation. See ya at $100-200 baby

  • Report this Comment On March 17, 2013, at 3:40 PM, TimKnows wrote:

    Laughable article, you haven't tried the new Z10 by BlackBerry so don't write the article. It will kill Apple and Android, forget about Nokia, it is not even a player.

  • Report this Comment On March 17, 2013, at 3:58 PM, tychicum wrote:

    I haven't seen anyone with a Nokia in years.

    There is no future in Android as there is no money in it ... how long do you suppose Google is going to provide its shi'ite for free?

  • Report this Comment On March 17, 2013, at 4:49 PM, Djag0909 wrote:

    Nokia users are price smart, they are few here they are in the rest of the world.

  • Report this Comment On March 17, 2013, at 6:35 PM, jeffreber44 wrote:

    Funny how these bbry fanboys act like their phones are better. Everyone knows that others steal from Nokia patents. It's just now that Nokia is sueing them all. That's why bbry had to pay Nokia 65 million this year and $10/phone of everyone phone bbry sells.

  • Report this Comment On March 17, 2013, at 7:51 PM, GudDanMan wrote:

    As McGlocklen says, "You are all wrong!". Just look at the inevitable future. That Android green box just keeps getting bigger by the year. I think it will increase, even from 65% to 75% or 80%. What does that mean? It means Apple will have less market share, mainly because of international markets, but it also means that Nokia and Blackberry are in trouble, next year and maybe even the year after that. And to make matters worse for Nokia, they have decided to stick with a loser, Microsoft. Best they get on board with this trend and offer Android asap. Fire that Microsoft exec who messed them up and do right by the shareholders. And to make matters worse, there are like 10 second tier cellular phone makers in the wings probably going to adopt Android this year and they will emerge, like a JVC, Panasonic, even a Hyundai or Emerson could get in the act here, if Nokia or Blackberry does not fill the low end Android market. Or maybe it will be a start-up cellular phone maker. So, who will survive? The answer is Nokia, because they do other things, and the government of Finland will step in. For Blackberry, the Canadian government is not so forgiving, so like Nortel, their future is questionable.

  • Report this Comment On March 17, 2013, at 8:39 PM, PDTomlinson wrote:

    Personally, I hope (and think) that BlackBerry and Nokia will eventually replace Apple and Android as the top systems. Apple is a very simplistic, and sometimes too simplistic, OS. Android, in my opinion, is a toy. But both BlackBerry and Nokia continue to innovate not only their hardware but also their systems. True, Nokia doesn't build their platform, but it is continuously being improved. Forget 3rd and 4th, 1st and 2nd!

  • Report this Comment On March 17, 2013, at 9:27 PM, RandomMeaning wrote:

    Time to start considering a third option: Samsung's Tizen.

    Not because it has any technical superiority that I am aware of. Simply because Samsung has the cash and the willingness to spend billions in marketing and spiffs to buy market share.

    Nokia's main problem is that they are entirely dependent on a partner who's OS has been in serious decline (Microsoft has gone from over 11% to about 2%). That's bad enough but Mr. Ballmer has already committed Microsoft as going all in on hardware. Does anyone doubt that a Microsoft phone is in the future? What need will Microsoft have for a "partner" they have to pay off to lose market share with?

    Blackberry deserves credit for remaining independent with their own OS. Problem is their server/subscription model to support their phones adds an unwanted expense for businesses and they lack the software talent to compete at this level. I'm sure they've got some great people but it's just not enough. It's taken them 5 years just to get to the Z10 and people are already asking, "that's nice, what's next?" The Q10, a niche device. What's after that? Also, Blackberry doesn't have the cash reserve. 2+ billion sounds nice until you realize Samsung is spending more than that in marketing alone.

    Again, this has nothing to do with how great or terrible the individual phones are. It's just business. Objectively, Samsung's Tizen has the potential to take third place from both Nokia and BlackBerry based on how the cards are playing out so far.

    And I'm not even a fan of Samsung. Although their hard drives are decent.

    I suppose it's worth noting the potential of a Microsoft phone within a year or two. I'm sure they've got test units up and running already. Short version: if they call it anything other than Windows xxxx, it has a chance. Even call it an XBox phone. If they insist on calling it Windows xxxx, it's doomed.

  • Report this Comment On March 18, 2013, at 6:50 AM, Rockymarchino wrote:

    Android is indeed free and opened but it is also a MESS.

    Macintosh is oldschool and boring.

    BlackBerry cant be found outside USA.

    Nokia is fresh, feels new and has a system easy to use.

    Facts and number talks for Nokia in this market. Do not only jydge from your own wiew. Nokia acts in many markets. At this price the stock is a bargain.

  • Report this Comment On March 18, 2013, at 7:32 AM, RandomMeaning wrote:

    "On March 18, 2013, at 6:50 AM, Rockymarchino wrote:

    Android is indeed free and opened but it is also a MESS."

    That's true.

    "Macintosh is oldschool and boring."

    Macintosh is a computer line. In fact I don't recall anyone saying "Macintosh" since the 90s. So, I guess that's correct in a way. But I guess you're actually referring to iOS and complaining that they don't radically change the UI frequently enough for you. Which is fine. For you. But, it kind of misses the point of the iPhone anyway. Apple presents the simplest way possible to get to the part you actually use: the apps. I don't know anyone who futzes around at the OS level on any phone except to get to the app they want.

    "BlackBerry cant be found outside USA."

    What? Granted BlackBerry is in decline but the majority of their sales are outside of the US. How can profess " Do not only jydge from your own wiew. Nokia acts in many markets." and not know this?

    "Nokia is fresh, feels new and has a system easy to use."

    To you, that may be true but it's hardly new. It's based on Microsoft's Zune interface originating from 2006 then applied to Windows Phone 07. So, hardly "fresh and new". Considering Windows Phone 07 never reached 3% market share, that's not a bragging point.

    "Facts and number talks for Nokia in this market. Do not only jydge from your own wiew. Nokia acts in many markets. At this price the stock is a bargain."

    Your facts are erroneous. Your "wiew" appears skewed. The numbers are frankly horrifying. Nokia has gone from top phone vendor with over 50% of the market to 5th rate fighting to survive, entirely due to the Windows OS. Maybe they would have declined anyway with some other OS but they certainly did with Windows.

    The stock may very well prove to be a bargain. If you did not own any prior to the decline, buy at a low point, and sell at a high point. The question is, where's the high point? And with Microsoft very likely to throw Nokia under the bus by selling their own Windows phone, there is the very real possibility that there will be no significant high point.

  • Report this Comment On March 18, 2013, at 8:57 AM, theflew wrote:

    To all the people that say BB has 80M subscribers, let's not forget Nokia sells over 80 million phones a quarter. The Asha line has more features than the BB7 devices. BB10 is great, but it will not sell as well in the developing countries as the cheap BB7 devices that could be had for less than $100 US. The biggest hurdle BB10 is going to have is competing with Android and now the Lumina 520/620 on the low end in developing countries.

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