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by Panos Mourdoukoutas.

For years, the stocks of Research In Motion (RIMM) and Nokia (NOK) outperformed the stock of Apple (AAPL) by a big margin. Recently, however, the three stocks have reversed fortunes: Apple's stock is currently outperforming those of Research In Motion and Nokia.

(right click "view image" to enlarge)

This reversal of fortunes seems to be just beginning rather than ending, as Apple’s stellar performance reflects sound fundamentals. As of April 2011, the company’s revenue and profit growth and profit margin by far exceed those of its competitors.

Descriptive Statistics
AAPL RIMM NOK
Revenues (ttm) $87.45B $19.91B $64B
Quarterly Revenue Growth (yoy) 82.7% 36.2% 9.2%
Operating Profit margin 29.02% 23.80% 5.13%

Gross Profit

$25.68B 8.82B 17.20
Quarterly Earnings growth 94.80% 31.60 -1.40

P/E

12.35 6.50 12.01

What drives these fundamentals? Why can't Research In Motion and Nokia beat Apple?

Apple derives its advantage from four factors:

  • Emphasis on detail. Apple is paying close attention to every aspect of the product supply chain, from design and branding to manufacturing and sales.
  • Better products. iPods and iPhones have a number of distinct advantages over their close competitors, Zune and Blackberry, respectively. The iPod has a bigger screen than Zune that is friendly to the users’ eyes; it’s wheel rather than button operated, and provides access to a larger library of songs. The iPhone has a larger screen than BlackBerry, a better (virtual) keyboard, a GPS map, and a unique configuration of internet, phone, iPod, and calendar tools.
  • Marriage of art and technology. Apple’s products don't just perform better, they look better. Apple’s marriage of art and technology in product design has transformed the company from a computer maker into a branding machine that creates an aura over its products which turns consumer interest into passion and desire, creating contagious behavior and hype that quickly reaches the consumer majority. Reflecting such emotional response, iMac, for instance, has been described by consumers as “funky,” “snazzy,” “extremely friendly,” “glowing,” “accessing,” and “electrifying."
  • Master of word of mouth and buzz. Apple is, perhaps, the inventor of word of mouth and buzz, using product pre-announcements and artificial shortages to nurture and foster hype among the masses, helping its products reach the tipping point, sooner than later.

Selected Advantages of iPod over Zune

Product

Screen Size

Song Access

Song Library

iPod

2 inches

touch sensitive- click-driven

large- Apple iTunes

Zune

2.5 inches

click-driven

small - Microsoft store

Selected Advantages of iPhone over Blackberry

Product

Screen Size

Music Capabilities

Keyboard

GPS Map

iPhone

large 3.5 inch - touch sensitive

4 or 8 gigabytes

virtual - touch sensitive

Yes

BlackBerry

small - not-touch sensitive

None

physical - button operated

No

Unfortunately for Research In Motion and Nokia, Apple’s advantages cannot be acquired in the market. They are part of Apple’s DNA, and that makes it difficult for everyone to copy and replicate.

Source: Why Research In Motion and Nokia Can't Compete with Apple