Over the past six months, Nokia Corporation (ADR) (NYSE:NOK) and Research In Motion Ltd (NASDAQ:BBRY) have worked their way out of a hole and re-established themselves as relevant players in the fast changing smartphone space. In light of their ongoing turnarounds, both companies have turned their attention to the all important U.S. market, in the hope of reversing long troubled fortunes.
While their efforts are without question commendable, the everyday U.S. consumer fails to notice their hard work. A report by MKM Partners made this revelation, begging a hard, yet inevitable question; Should these turnaround players place more focus on other markets other than the U.S.?
MKM’s study relates to the three week period that began in late March and ended early April. The research firm, which reiterated its sell rating on both the stocks, conducted the study across a sample of 1,500 U.S. consumers.
Indeed, the U.S. smartphone market arguably offers some of the best prospects for smartphone companies. Of those surveyed, 51% owned a smartphone. To sweeten the pot, more than 39% of those who owned a smartphone bought it in the past six months. In addition, a further 37% intend to buy one over the next 12 months. This heightened activity in the smartphone market explains why all major smartphone companies have a presence in the U.S.
Having a presence in the U.S. is however just the beginning. Being Apple Inc. (NASDAQ:AAPL) or Samsung is the final determinant. Simply put, the U.S. market belongs to Apple and Samsung, which is an outgrowth of Google Inc (NASDAQ:GOOG), considering it’s based on Android.
Of the respondents in MKM’s study, 33% of them owned an Apple Inc. (NASDAQ:AAPL) iPhone while 28.3% owned a Samsung. Of the remaining respondents who didn’t own an iPhone or a Samsung, a good number of them used smartphones that run on Google’s Android. Nokia Corporation (ADR) (NYSE:NOK) and Research In Motion Ltd (NASDAQ:BBRY) users were only 3.4% and 4.4%, respectively. Lesser discussed handsets like LG even towered above the two, enjoying a share of 9.9% of the respondents surveyed.
The loyalty exhibited by Samsung and Apple Inc. (NASDAQ:AAPL) lovers in the U.S. is real. In fact, nicknames such as ‘Apple fanboy’ have become commonplace in tech circles. While 44.5% of MKM’s respondents were not sure of the next smartphone they will buy, 19.6% were settled on buying a Samsung, while 17.7% an iPhone. Those opting for BlackBerry were 5.9%, while those going for Nokia came in at a paltry 0.7%.
This snapshot, gives a picture of just how dim things look for Nokia and Research In Motion Ltd (NASDAQ:BBRY) in U.S. What is the way forward for these two turnaround players?
Nokia should focus on emerging markets, BlackBerry should re-establish brand
Moving forward, Nokia Corporation (ADR) (NYSE:NOK) and Research In Motion Ltd (NASDAQ:BBRY) should come up with decisive strategies to offset the dismal progress made in the U.S. market.
Focusing on Nokia first, I believe that it should intensify its efforts on emerging markets. Only then will it have the muscle to gnaw into Apple Inc. (NASDAQ:AAPL)’s and Google Inc (NASDAQ:GOOG)’s share in the U.S. As it is, there is a handset glut in the feature phone market, with the majority of these entry level handsets coming from Nokia.
Just recently, the company launched a $23 entry level feature phone in India. This new phone, which will be the cheapest under the brand, is expected to cater to first time phone users and existing users looking for an emergency phone. Nokia’s dominance in the feature phone market will prove instrumental when consumers in emerging markets finally start warming up in numbers to smartphones.
In India, particularly, its entry level Nokia Corporation (ADR) (NYSE:NOK) Asha smartphones are already doing well. Most of Nokia’s feature phone customers who have shifted to smartphones opted for the Asha.
Research In Motion Ltd (NASDAQ:BBRY), on the other hand, should focus on re-establishing its brand in the U.S. The downfall of its brand is signaled by carriers’ unsaid, yet loud, disapproval of the Z10 smartphone. Although they had earlier promised to throw their full weight behind the Z10, this did not happen when the Z10 launched in late March.
Instead, there was a muted Z10 response, not only from consumers, but from carriers as well. It is noted that on the day of the launch, AT&T stores in New York were going about their usual business. There were no posters or any sign of marketing to mark the launch date.
Personally, I believe that the mixed reactions were justified. Carriers would rather build hype around a brand like Apple Inc. (NASDAQ:AAPL) that sells in the U.S., than expend resources on unpredictable products. To counter this, BlackBerry will need to re-establish its strong band, create a new image of fun, entertainment, and coolness while still managing to bring out that defining enterprise lineament.