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When Nokia (NYSE: NOK ) got a huge jump on its main competitors for the third-place spot in the smartphone wars by going to market months sooner, it looked as if Microsoft's (NASDAQ: MSFT ) Windows was going to be the undisputed third operating system. The BlackBerry (NASDAQ: BBRY ) 10 OS faced more delays, and a real fear existed that by the time the company's Z10 hit the U.S., it would be too little, too late. With Friday's long-awaited release getting BlackBerry into the fight, a new threat is lurking on the horizon.
While rumors of a new Intel (NASDAQ: INTC ) -driven smartphone platform surfaced late in 2012, discussion of the new OS developed by a consortium including Samsung, Huawei, and other Asian telecoms has intensified of late. The new platform, dubbed Tizen, is being developed to address a very real flaw that exists at the overlap of Google's (NASDAQ: GOOGL ) Android and the Asian smartphone market. Given the critical nature of this market, its introduction is bad news for Microsoft, BlackBerry, and even for Google. The battle for third, and maybe even for the entire market, is by no means determined as things stand.
The first-mover advantage
Last fall, Nokia and Microsoft got a huge jump on the market by being the first of the No. 3s to market by signing a critical deal with China's largest wireless provider. With 700 million users in that network, Nokia's Lumia 920T was well positioned to provide a realistic alternative to Android and iOS that could take advantage of the structural peculiarities of the Chinese market -- most Chinese users are upgrading from 2G to 3G and use a different protocol that Nokia specifically addressed in many of its handsets, specifically the TD-SCDMA network.
Since that victory, the company has introduced cheaper versions of its smartphone specifically intended to target emerging markets such as Africa. Microsoft continues to build out its ecosystem, and as more Windows Phones head to market, both companies are positioned to benefit. Ultimately, when BlackBerry announced that the Z10 wouldn't hit U.S. shelves until late March, it seemed Nokia had third placed locked up.
BlackBerry finally comes to the U.S.
Last Friday, BlackBerry finally brought the Z10 to the U.S. for sale. The release of the new device lacked the fanfare you recently saw when Samsung unveiled the new Galaxy S4 . Unfortunately for fans and investors, BlackBerry seems to be going through a bit of an identity crisis, not really targeting business users, but not fully appealing to individuals, either. "I expect that we're going to hit the ground running," said Frank Boulben, the company's chief marketing officer, citing "substantial pent-up demand." If such demand exists, it's likely to be from the business community, making the current "Keep Moving" ad campaign a little hard to follow.
It remains to be seen if BlackBerry can take a meaningful role in the smartphone wars or if the company will be relegated to the role of a historical legend whose time has passed. If it can regain some relevance, the potential stock performance could be substantial.
New kid on the block
While the new Tizen OS has not even been officially released -- Samsung is expected to unveil a high-end smartphone that uses the platform by the end of the summer -- it's already getting a lot of ink. At the core of Tizen is the reality that Google doesn't command the same loyalty or usage that other Asian options do in that region. Android has been a free and workable solution for Asian smartphone needs, but in many cases, the manufacturers also include a user interface that circumvents most of Android's functionality. This creates the proverbial lose/lose scenario.
Under this construction, Google isn't making any money because these devices essentially work around the native functionality that drives users to search and other Google apps. The local search engines are unable to really integrate functionality into smartphones that rely on Android, meaning that users receive an experience that lacks optimization. Lastly, because all of these manufacturers are reliant on Google, they can negotiate better terms for themselves with the local market. The need for an alternative is obvious and being addressed with the aid of Intel, one of the point developers of Tizen.
With the new OS, all of these problems can be addressed. This does mean, however, that Google is suddenly facing some real competition in that part of the world. The news is probably worst for BlackBerry, which needs another obstacle like it needs cancer. Just as Microsoft is expanding its relationships with Windows, Nokia may consider creating a Tizen smartphone, but in all cases, the race for third has become far more complex and interesting. It's too soon to call this battle, but investors should watch carefully, because the fates of all players may come into play.
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