Research In Motion Ltd (NASDAQ:BBRY)s new BlackBerry 10 isn’t living up to sales expectations. Nokia Corporation (ADR) (NYSE:NOK)‘s Lumia smartphone has also seen less than spectacular sales despite positive reviews. Microsoft Corporation (NASDAQ:MSFT), meanwhile, was forced to pay Nokia Corporation (ADR) (NYSE:NOK) to use its Windows Mobile operating system in the Lumia. The fight for third place in the mobile market isn’t an epic battle, but eventually one of this trio will win.
A rough launch
Research In Motion Ltd (NASDAQ:BBRY)s future in the mobile handset market pretty much rests on BlackBerry 10. The phone has some nice features, including the ability to separate work from pleasure and Research In Motion Ltd (NASDAQ:BBRY)s always high-quality security. However, the phone was exceptionally late to the smartphone party. That put it at a distinct disadvantage compared to industry leaders Apple Inc. (NASDAQ:AAPL) and Samsung.
Unfortunately for BlackBerry, the launch of the phone added to the challenge. The key smartphone market is the United States, but the company chose to launch the phone in foreign markets before bringing it out in the States. That likely killed any momentum that might have built up domestically.
The other problem that BlackBerry faces is that its business model is similar to Apple Inc. (NASDAQ:AAPL)’s in that it is trying to control every aspect of its phone from design to OS. Only BlackBerry doesn’t have the installed base of Apple Inc. (NASDAQ:AAPL) or the cache, so what was once a big positive for the company when it was the technology leader is now a big negative.
In two years, the company’s top line has fallen from nearly $20 billion to $11 billion. It lost almost $1.25 a share last year. The weak sales results of the new phone in the first quarter led to a steep share decline and another quarterly loss. It looks like BlackBerry will be lucky to hold onto its keyboard-enabled phone niche if it survives in the handset space at all. Investors should avoid the shares.
Burning the candle at both ends
Nokia, meanwhile, has been focusing intently on its Lumia smartphone. The launch went reasonably well and the phone received solid marks. While sales have been weaker than hoped, the big problem has been increasing competition from cheap Asian handsets in the emerging markets.
The company’s core strength in recent years has been a dominant position in fast growing emerging economies. As the smartphone segment has matured in developed markets, however, Asian handset makers have been pushing into those markets and taking market share from Nokia Corporation (ADR) (NYSE:NOK). It looks increasingly like management took its eye off the ball by focusing too much on the Lumia.
Nokia’s top line has been falling since 2007, it has lost money in each of the last two years, and it was forced to eliminate its dividend to help shore up its finances. Although the Lumia is a nice phone, it is increasingly looking like an also-ran product from an also-ran company. Investors should avoid Nokia, too.