Earlier this year Research In Motion Ltd (NASDAQ:BBRY) launched its much awaited Z10 phone, which has the company’s brand new BlackBerry 10 operating system. These new phones are competing against Apple’s iPhone, a slew of Android phones, and Windows phones, and it will be tough for the company to gain any traction. It seems unlikely that Research In Motion Ltd (NASDAQ:BBRY) can return to dominance, and questionable whether or not the company can become profitable again. The new phones launched recently, so time will tell if they prove to be popular. If they fail, then BlackBerry will likely see its z-score slide into the danger zone and bankruptcy will become a real possibility.
Nokia
Nokia Corporation (ADR) (NYSE:NOK) is a Finnish company that is now best known for partnering with Microsoft and selling the Nokia Lumia line of Windows Phones. The company still sells a large number of non-smart phones around the world, but this number has and will continue to shrink as the smart phone market grows. In Q1 of 2013 Nokia Corporation (ADR) (NYSE:NOK) sold 5.6 million Lumias, although most of these were outside of North America. This is up from 4.4 million in the previous quarter. However, the company still was unprofitable during the quarter, as it has been for the past two years. Is the company in danger of going bankrupt? Here’s the z-score calculation.
All values in millions
I’ve converted the share price to Euros for the purpose of the calculation. Since everything is a ratio the currency doesn’t matter as long as every value is in the same currency.
By 2012 Nokia’s z-score had fallen within the danger zone, and if the losses incurred that year continue the company will be in big trouble. However, the first quarter of this year was far better than the last in terms of profitability. Revenue dropped, but net income went from -929 million EUR to -272 million EUR, and EBIT went from -1,340 million EUR to -150 million EUR. If Lumia sales continue to rise it’s possible that Nokia Corporation (ADR) (NYSE:NOK) could return to profitability this year or the next.
Of course, Windows Phone could fail to gain any considerable market share, in which case Nokia Corporation (ADR) (NYSE:NOK) would likely be finished. But it seems that Windows Phone is gaining some traction, as market share in the US has grown from 3.7% in the first quarter of 2012 to 5.6% in the first quarter of 2013. And since Nokia Corporation (ADR) (NYSE:NOK) accounts for most of Windows Phone sales by choosing to partner with Microsoft the company has differentiated its products from a slew of Android-based devices.
Nokia’s future depends on Windows Phone gaining market share, and with Microsoft’s support it seems that there is a good chance of this happening.
Data from Morningstar
The article Are These Companies in Danger of Going Bankrupt? originally appeared on Fool.com and is written by Timothy Green.
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