Nokia Corporation (ADR) (NOK), Research In Motion Ltd (BBRY): Who Can Overtake Apple Inc. (AAPL)?

Page 1 of 2

Nokia Corporation (ADR) (NYSE:NOK)A couple of months back, through my article “Which Underdog is More Likely to Become a Top-Dog?”, I had expressed how I felt about Nokia Corporation (ADR) (NYSE:NOK) recovering faster than Research In Motion Ltd (NASDAQ:BBRY). How wrong I was! Since then, a lot has happened and I am now forced to change my stance as already evident from my recent articles on Research In Motion Ltd (NASDAQ:BBRY).

The Canadian phone maker launched the BB10 platform and has encountered some amount of success as well, posting better than anticipated results and has managed to grab the attention of some big names such as Canadian Tire and now even Verizon Communications Inc. (NYSE:VZ) .

On the other hand, Nokia Corporation (ADR) (NYSE:NOK) has been suffering continuously and is still stuck in the downward spiral. The Finnish giant’s last earnings report also brought on a lot of criticism on the company’s efforts and raised questions about its prospects.

A little about Nokia’s last quarter

Negatively impacted by poor handset sales, Nokia Corporation (ADR) (NYSE:NOK) failed to meet analyst expectations and reported a loss of $357 million for the quarter ended March 31. Though, in comparison to the prior year, Nokia did well and pulled down the net loss from staggering $1.2 billion, the phone maker suffered primarily because of the 46% decline in the sales of its Asha series of smartphones as total smartphone sales plunged almost 32%. All in all, another set of not-so-good results. In comparison to Nokia Corporation (ADR) (NYSE:NOK)’s latest quarter, Research In Motion Ltd (NASDAQ:BBRY)’s was far better and the company made all stakeholders feel that it has started to deliver what it had promised to.

Support from Verizon for BlackBerry

The latest BB10 devices are witnessing gradually increasing demand and even Verizon Communications Inc. (NYSE:VZ) CEO Daniel Mead can see that. At a recently held investor’s conference, Dan Mead mentioned that the top U.S. wireless carrier is interested in the BB10 offerings, and especially on the Q10, as they can see growing demand for the devices. The Z10 has already contributed strongly to Verizon Communications Inc. (NYSE:VZ)’s sales and the same is being expected from Q10 also. The devices are looking attractive to Verizon all the more because of the understandings between Verizon and Research In Motion Ltd (NASDAQ:BBRY).

As the top U.S. carrier, even Verizon Communications Inc. (NYSE:VZ) has certain plans and strategies and many times those are not being satisfied by Apple Inc. (NASDAQ:AAPL). First of all, Verizon has to incur huge costs to subsidize and make the iPhone available for $199 with a two-year contract instead of the actual price of $649. With BlackBerry, the cost of subsidizing is much less and thus offering a BlackBerry device is less costly for Verizon (or any carrier for that matter).

Secondly, Apple Inc. (NASDAQ:AAPL) enjoys huge brand power and thus has a higher bargaining power over Verizon Communications Inc. (NYSE:VZ), which obviously is not much desired by the latter. Also, Verizon’s dependence on the iPhone may turn out to be fatal for the carrier. During the latest reported quarter, Verizon activated 7.2 million smartphones and among them 4 million were iPhones. So, in order to curb Apple Inc. (NASDAQ:AAPL)’s growing dominance and its dependence on the iPhone, Verizon Communications Inc. (NYSE:VZ) is keen on the latest BB offerings.

A comparative landscape: Stock price angle

Both the companies are trying to pull off a recovery and so far, Nokia Corporation (ADR) (NYSE:NOK) isn’t doing that well. However, it’s no surprise that Research In Motion Ltd (NASDAQ:BBRY) has shown some substantial improvements. Many analysts (who favor Nokia) might say the BlackBerry has lost almost four-fifth of its previous value. But still, the present scenario seems more attractive.

Since April 1, 2013, Research In Motion Ltd (NASDAQ:BBRY)’s stock has gained 15%, while Nokia Corporation (ADR) (NYSE:NOK)’s gain has been just one-third of that. Next, looking at the year-to-date data, BlackBerry has gained 33% while Nokia has lost 11%. Investments in BlackBerry have already started fetching better results and this will definitely stand as an investor’s attraction.

April 11, 2013 May 11, 2013 Change % Change
Nokia $ 3.48 $ 3.66 $ 0.18 5%
BlackBerry $ 13.55 $ 15.54 $ 1.99 15%
Jan. 1, 2013 May 11, 2013 Change % Change
Nokia $ 4.11 $ 3.66 $ (0.45) -11%
BlackBerry $ 11.72 $ 15.54 $ 3.82 33%

(Source: Google Finance)

Now, investing in stocks doesn’t only mean looking at past, but it’s more about the future, and here as well, Research In Motion Ltd (NASDAQ:BBRY) is leading.Nokia Corporation (ADR) (NYSE:NOK) is currently trading at $3.66 (as of this writing), and industry experts and analysts are of the opinion that the stock might not gain much value from here. According to Yahoo Finance, the mean target for Nokia is $3.30 and the median target is $3.00. Nokia is already above both these targets. So, if these estimates turn out to be accurate, investors who have freshly invested in Nokia at the current price stand to lose a bit. Even big names such as Barclays, MKM Partners, and RBC Capital have downgraded Nokia.

Page 1 of 2