I love companies that are in control. Apple (AAPL) dictates its terms to its suppliers. It innovates, and its competitors scramble to match. And then, there are Nokia (NOK) and RIM (RIMM), two once-great companies that have been crushed. For Nokia and RIM, their only remaining power is choosing how they end: Death by fire or death by drowning.
Surprisingly, Nokia CEO Stephen Elop made that call in early 2011 when he brilliantly compared his company's plight to a man standing on a burning oil platform in the North Sea: Does the man burn to death or does he jump into the freezing waters? He counseled his troops to abandon Nokia's blazing Symbian platform and dive into the uncertainty of Windows OS, a long-shot survival plan to counter mighty Apple and Google (GOOG). A miserable dilemma: Death by fire or almost certain death by drowning?
(I've had readers complain that the analogy is unfair to Nokia. It's Elop's; not mine. One reader actually complained that the ill-fated platform should be in the Baltic rather than North Sea. Again, talk to Elop.)
Elop's plan didn't work out well. Since his decision, the share price has plummeted over 80% as revenue, earnings, and margins plunged. Nokia made a gutsy move, dumping its Symbian platform and moving to Windows. The likely result: Death by drowning.
Extending the analogy, RIM stayed on its platform. It kept its BlackBerry OS. Out-maneuvered by Apple and Google, RIM couldn't keep up. Its BlackBerry 10 has been repeatedly delayed. Margins are gone. Profits are non-existent. Smartphones shipped are down over 40% from year-ago quarter. RIM chose the burning pyre.
What you don't get to choose in this business is your competition. And that competition has been fierce. Apple set those fires. Google threw on gasoline.
Who picks at the bones? Google already owns a hardware company. Microsoft has $50 billion of cash sitting in its foreign subsidiaries, and could easily swallow either Nokia and RIM. The digesting part would be tougher. Why buy Nokia and RIM's inferior technology? Microsoft doesn't need them; it's already out-engineered its PC partners with its Surface tablet? With Nokia and RIM in a death spiral, why not wait for their inevitable price decline? A $1.50 and $6.00 anyone?
RIM and Nokia are definitely not steering the boat. The two control only how they go: Death by fire; death at sea.
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Disclosure: I am long (AAPL).