Nokia (NYSE:NOK) and BlackBerry (NASDAQ:BBRY) have been fighting hard to remain relevant in a Google (NASDAQ:GOOG) - Apple (NASDAQ:AAPL) dominated mobile world. Android and iOS will account for almost 90% of the 1 billion smartphone and tablet shipments in 2013. iOS with its tight integration between software and hardware and Android with its free, open source OS provide two contrasting choices for customers. While iOS dominates the high-end premium market, Android rules the low-end segment. BBRY and Nokia are trying hard to become a third alternative in the mobile industry. Both the companies have been executing a turnaround in the last couple of years through major strategic changes and large cost cuts. While BBRY has been ahead of Nokia in its turnaround, it has stumbled recently. Nokia on the other hand has seen its stock price increase sharply after the Q113 results, as it has seen good traction in its Lumia range. The company recently introduced a powerful camera smartphone to differentiate itself in the massively competitive smartphone market. Microsoft (NASDAQ:MSFT) too is rapidly improving its smartphone OS to compete better with Android and iOS. However, the jury is still out whether Nokia can take advantage of BBRY woes to become the undisputed No.3 ecosystem provider.
BlackBerry has performed quite well in the smartphone space by introducing new smartphones based on a totally new OS. However, the company faltered in its marketing and pricing strategy. The company has also not been helped by the fact that the smartphone market is seeing extreme competition from a bevy of new Asian competitors. Even market leaders Samsung (OTC:SSNLF) and Apple have seen their stock prices decline sharply as sales and profit growth has slowed down.
While BBRY products are pretty good, the company lacks the marketing and distribution muscle to really push sales in a global market. The company's premium pricing has also not helped, and the company was forced to sharply cut prices after poor quarterly results. BlackBerry's BB 10 shipments have fallen much below expectations, and the company is predicting losses in the next few quarters. It will not be easy for BBRY to survive alone in the cutthroat technology market without spending big on marketing. Without enough BB 10 sales, BlackBerry could see its new OS becoming irrelevant. The network effort effect could finish off BB 10 just like it killed Windows rivals in the 80s and 90s.
Nokia's 41 MP 1020 is a differentiator
Nokia knows that it has to differentiate itself from the competition in order to become a sizable player in the smartphone arena. Nokia's "Pureview" technology is one such differentiator that Nokia is marketing heavily to create a powerful alternative to the Samsung Galaxy 4 and iPhone. Just using a more powerful processor and a bigger/brighter screen won't help Nokia. The company's management has realized this and the new 41 MP Nokia 1020 is the best camera smartphone in the market. The company's previous 808 Pureview smartphone was based on the dying Symbian OS and was destined to flop. However, the 1020 based on Windows OS 8 can give the top smartphones a run for their money. The camera functionality is probably the most used feature of smartphone after connectivity, and giving customers the best imaging functionality is a good idea. It remains to be seen whether the 1020 can become a blockbuster like the iPhone or Razr. Even if it does not become a blockbuster smartphone, the buzz around the new 41 Megapixels functionality should have rub-off effect on Nokia's other smartphones.
Windows OS is improving
The Windows OS is not as good as iOS and Android as Microsoft only recently started to focus on the smartphone OS. Microsoft realizes the importance of becoming a big mobile OS provider and is reorganizing and reorienting to becoming a major mobile player. The company is introducing new features and patches rapidly to catch up with the smartphone OS leaders. Nokia had seen its Lumia "x10" series flop, as Windows 7 was just not good enough. It has got better traction with the "x20" series based on the Windows 8 OS. In fact, Nokia has managed to intimidate rival Windows 8 smartphone makers. As Microsoft brings more changes and improvements, Nokia can capitalize on improving its low single digit market share.
"I'm very happy with the decision we made," he said. "What we were worried about a couple of years ago was the very high risk that one hardware manufacturer could come to dominate Android. We had a suspicion of who it might be, because of the resources available, the vertical integration, and we were respectful of the fact that we were quite late in making that decision. Many others were in that space already."Now fast forward to today and examine the Android ecosystem, and there's a lot of good devices from many different companies, but one company has essentially now become the dominant player."…"Strategically that's important for us [to be offering an alternative OS] because having a conversation with [chief executive] Ralph de la Vega at AT&T, the first step in the conversation is the recognition that we're not Apple, we're not Samsung/Android - used to be Android/Samsung, it's actually about Samsung now - we're a third alternative."
Source - Guardian
Nokia Stock Price and Performance
Nokia's stock price has climbed to the $4 level after tumbling below $3 post its poor Q113 results. A slew of Asha and Lumia launches plus the cheap buyout of Siemens (SI) equity stake in NSN has helped. The new Lumia phones are getting good traction in global markets and the cheapest Lumia 520 has been a big success (sold out in a number of markets). Nokia's valuation remains low with a P/S of just 0.4x and a market capitalization of just $15.5 billion. The company has great assets and has been frequently talked about as a buyout target.
Nokia has got a great chance to grab the position as the provider of the 3rd major ecosystem in the mobile market. The company has made some nice moves in the last year under its new CEO Stephen Elop. The company is getting traction with its new Lumia range of smartphones and the 1020 launch could help the company to reach a double digit market share in the next couple of years. The cheap buyout of NSN has also helped Nokia consolidate its balance sheet, as NSN is cash flow positive. I remain positive on Nokia given its cheap valuation and improved competitive position.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.