Smartphone Wars: The Battle for Third Place Has Gotten Interesting

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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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Read/Post Comments (11) | Recommend This Article (2)

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  • Report this Comment On March 26, 2013, at 10:58 PM, jeffreber44 wrote:

    Nokia is now looking past at 3rd place and taking Apple and Samsung headon for 1st.

    April 18th Nokia begins to rule the world.

  • Report this Comment On March 26, 2013, at 11:35 PM, litton88 wrote:

    I haven't used smartphone since 2007 and I think it's rather comical to see people arguing my-smartphone-is-better-than-your-smartphone.

    I've only seen 1 Nokia fan so far. Samsung fans are very vocal; I guess Koreans don't like being sued (who does). Apple fans are rather quiet; I think they are so used to being the underdog.

    No Blackberry fans yet. I wonder what they will say.

  • Report this Comment On March 27, 2013, at 12:11 AM, eidsonb wrote:

    This BB fan says this is old news....

  • Report this Comment On March 27, 2013, at 1:28 AM, jwjsprenger wrote:

    Another back door way for the Motley Fools to take shots at BB. I hope Samesong starts to market phones with Tizen because no one will buy them leaving more room for innovative products like BB z10.

  • Report this Comment On March 27, 2013, at 1:28 AM, ecaffeine wrote:

    +1 BB fan.

    Anyone else find it ironic that the article says that blackberry is too late AND that this yet unreleased operating system is a potential threat to windows/blackberry/android/apple?

  • Report this Comment On March 27, 2013, at 1:57 AM, Beerfloat wrote:

    Uhm, it never looked like Windows was going to be the 'undisputed third operating system' to begin with.

    Anyone who has been paying attention to Microsoft's attempts to branch out into mobile devices over the years would have had plenty of warning. After failures like Windows CE, Windows for Pen Computing, the Pocket PC, the Tablet PC, the Zune, the Kin, Windows Mobile and WP7, why would anyone expect even moderate success this time around?

    Aside from that, the whole narrative about the market somehow clamoring for a viable third ecosystem was a contrived talking point from the get go. The market is fine with the duopoly and has adopted a wait and see attitude towards the host of contenders out there, with Windows Phone currently only in 5th or 6th place, and even Blackberry looking more promising at this point.

  • Report this Comment On March 27, 2013, at 2:15 AM, symbolset wrote:

    In asia when an Android phone sells an iPhone, Blackberry or Windows Phone does not sell. That's one less user for the competing ecosystem. One less person to draw developers away. One less potential evangelist for the competing technology, another peer to apply pressure to encourage others to do the same. It's a few dollars less in the pocket of their challengers.

    I doubt they care if they have three challengers or twelve, or if they ever make a buck in China - as long as China doesn't give their competitors too much of a leg up. When they give Android away for free to all the world it's not like China costs them extra. They still get something out of it.

  • Report this Comment On March 27, 2013, at 6:33 AM, PurpleBlue wrote:

    Brick by Brick BBRY's Back

    The quote 'Brick by brick, my citizens!' is attributed to the Roman Emperor, Hadrian builder of Hadrian's Wall in Britain and many temples in Rome and Athens.

    More recently the quote was used by jockey Red Pollard in the movie Seabisquit. For those of you who haven't scene the movie. Both the jockey and horse suffer devastating injuries and it is assumed they will never compete again. In spite of the injuries, the spirit within the man and the horse wouldn't die. When asked by the owner how they could possibly rebuild their strength to compete, 'Brick by brick! the jockey replies. A determination that was embedded deep in their DNA - enabled both jockey and horse to regain the strength to compete and win against the much larger, stronger favorites.

    Thorsten Heins has given BlackBerry(BBRY) the same kind of challenge and they have responded - rebuilding the BlackBerry platform brick by brick, day by day, country by country, product by product, and most importantly, customer by customer. Listening to customers, envisioning the future, and believing that there is plenty of room in the market place for a more complete and efficient communications device, BlackBerry is succeeding.

    US - AT&T Sales

    Jefferies analyst, Peter Misek has reported (March 25, 2013) that 30+ store checks indicates first day 'initial sell in' to be '10+ per store' with 'a few slower and a handful stronger'.

    'Some stores were out of stock but expected replenishment shipments this week. Our checks also indicate that AT&T Business is seeing significant interest and could account for a meaningful portion of demand. We note that even if BBRY only has a niche 5% of the US smartphone market with BB10 that represents a substantial rebound from its current <2% share.'

    Verizon launch 3/28

    Misek believes that Verizon was the customer that recently ordered 1M BB10, and his checks indicate that Verizon business sales are strong.

    BB10 Build-out

    Misek and Jefferies believe that initial BBRY initial build plan was for 1M BB10 devices per month but that was subsequently raised to 1.2-1.5M and raised a second time to 2M per month.


    The increasing build-out has Misek confident in his above consensus estimates for the May and August quarters. Misek projects in the May quarter BBRY will report positive earnings of $0.33 per share on revenue of $4.2B. His August quarter estimates are $0.31 per share on $4.1 revenue. Misek's projections based on assumptions that 4M BB10 handsets are sold each quarter.

    Mobile Device Management (MDM)

    Misek believes that most of the near term focus has been on the new BB10 phones and that 'the mobile device management opportunity is underappreciated.' He notes that BES10 is being 'widely trialed by corporations' before implementations begin in May and June. He believes that AT&T will heavily support BES10 and that BlackBerry's:

    'MDM software will gain traction throughout this year and see significant ramp in revenues next year. Supporting devices with the best, most secure, easiest-to-use mobile solution should enable BBRY to transition to an attractive business model.'

    Jefferies Target

    Jefferies maintains a buy rating and $19.50 target.


    Victory for BlackBerry will be consolidating its position worldwide. They have loyal users and converts that are buying their devices.

    Initial analysis from Misek suggests that BlackBerry enterprise solutions have plenty of stickiness and the opportunity to hold and increase its place in secure government, and enterprise sites. Mizek points out that this opportunity is substantial.

    The Z10 devices cutting edge features make it attractive to a broad range of consumers. I have spoken with a number of salespersons in their early twenties that have purchased the device and were eager to show it off. Clearly the new devices are more appealing than the older BlackBerry's to a wide segment of potential users. The Q10 will become the high-end qwerty solution in the marketplace. Legacy models and perhaps some of the new unreleased devices will find niches among more price sensitive consumers and jurisdictions.

    For the last 12 months the questions were could Blackberry survive, would the devices be any good, and would BlackBerry succeed in the marketplace. The answers have been yes, yes and it's looking very positive. Additionally, we have learned that BlackBerry' enterprise solutions are still very much in demand and may be undervalued.

  • Report this Comment On March 27, 2013, at 7:33 AM, infektu wrote:

    I am not one to guess shipments or revenues, but can not resist when watching logic being twisted.

    This article says two things in the same breath:


    a. Z10 "could be too little, too late"


    b. a platform which is not only unfinished (and for all we know, yet at the black-box concept stage and might not even see the light of day) might "steal the no.3 spot"

    The same contorted view compares the release of the Z10 which supposedly "lacked the fanfare" with the "unveiling" of new Galaxy S4, which is still months away from "release", and as such can not be bought for any price, no matter how much of a fan of umpteen-core, power hungry, bloated slates one may be.

    I guess this is last minute shopping, since the QR is due tomorrow, but we shall see.

  • Report this Comment On March 27, 2013, at 8:40 AM, TimKnows wrote:

    Why are we still seeing nonsense like this on the hour now? Tizen looks terrible.

  • Report this Comment On March 27, 2013, at 11:21 AM, techy46 wrote:

    Don;t look now but Lenovo is making an Intel Android smart phone called the S920 ala Nokia's Lumia 920.

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