Nokia or Research In Motion: Which Is the Better Rebound Candidate?
Dec 18th 2012 8:30PM
Updated Dec 18th 2012 8:46PM
If it were left to just the two of them, the battle for market share, long-term growth, and, yes, even relevance in the mobile marketplace, between Nokia and Research In Motion heading into 2013 would be one for the ages.
Alike in many ways, particularly their respective business stages, there are differences Nokia and RIM investors should consider, particularly if you're looking for growth alternatives. As we move into 2013, both Nokia and RIM are poised with new products, new operating systems, and a hiccup or two from industry-leading Apple . Fans of each are ready to usher in the new year.
The case for RIM
It's been more than a month since RIM CEO Thorsten Heins announced the news RIM shareholders had been waiting for -- BB10 is coming. Loaded with new and upgraded features, RIM's new OS and phones running BB10 are scheduled for worldwide introduction on Jan. 30.
To Heins' credit, he's made it clear RIM intends to focus on what it does best -- provide companies and public sector employees with a secure smartphone experience. Yesterday's announcement that RIM will roll out BB10 on a limited basis to some of its biggest corporate and government clients demonstrates that commitment. What the beta-type rollout also does is reinforce how important it was that RIM received FIPS 140-2 certification before BB10 even hits the streets. Earning the FIPS 140-2 certification means BB10 has already met U.S. government security and user guidelines, allowing for its early testing by the public sector. Nice move; and it should give us some real-world feedback on BB10 sooner, as opposed to later.
As RIM fans are quick to point out, and rightfully so, the company has continued to add to its strong balance sheet, even as sales have slumped. And with more than $2 billion in cash to go along with zero long-term debt, RIM has bought itself plenty of time for the adoption of BB10. Its strong balance sheet, combined with the excitement over BB10, has driven RIM's share price up 51% the past month, for a whopping 92% over the past three quarters.
The case for Nokia
Nokia's share price is also up, a cool 42% in the past month. Like RIM, much of the increase is due to a continuous stream of positive news. Among the highlights are that Amazon.com and AT&T both sold out of their allotment of Lumia smartphones early, and quickly. Also, Nokia's entry-level smartphone alternatives shouldn't be ignored. The introduction of its lowest-priced Lumia yet, the 620, costs a mere $249 without subsidies, making the 620 the least expensive smartphone running Microsoft's Windows 8 OS. The 620 is being shipped to Asia, Africa, Europe, and the Middle East in January, before rolling out to other markets.
The recent deal with China Mobile to supply its 700 million customers with Nokia's made-for-China Lumia 920T, was good news in and of itself. If early indications prove correct, it appears Nokia has a hit on its hands. According to Amazon.com China, the Lumia 920T is the leading, high-end smartphone in its lineup, and that includes the recently released iPhone 5 from Apple. The only problem? Keeping enough Lumias in stock, something that needs to be addressed, now.
Apple didn't win its most recent court case against Samsung, but it remains the primary competitor to Nokia and RIM in the smartphone industry. Samsung sells more phones worldwide, as does Nokia, but in the high-end, high-margin smartphone market, Apple reigns supreme. Its recent deal to bring back Google maps has quelled those concerns.
As for Google, its own Nexus smartphone, which is selling more than a million units a month, is just the tip of the iceberg. As it continues to assimilate Motorola Mobility, expect to see more Google smartphone offerings. And you can expect the same from Microsoft, too. The surface tablet was its initial foray into mobile computing, but with Windows 8 off and running, a Microsoft phone won't be far behind.
Both Nokia and RIM are poised for a stellar 2013. Even as Nokia trims non-core businesses, refinances at least part of its debt, and announces early Lumia successes, looking the competitors straight in the smartphone eye has its risks. RIM, as it should be, is attacking the commercial and public sector, a market it could dominate. As for BB10, the upside is tremendous.
So what separates the two? For me, Nokia offers a few things RIM doesn't. Namely, a $6 billion patent portfolio generating $650 annually, and more to follow now that RIM has lost its patent infringement suit to Nokia. Nokia, too, is in a strong cash position, and concerns regarding the continuation of its 6.4% dividend yield (as voiced by many a Fool) are premature. RIM's stratospheric rise in value also makes me wonder how much of a successful BB10 rollout is already factored into its share price.
Finally, a $20 RIM stock price in 2013 wouldn't surprise me in the least -- assuming BB10 meets expectations, that is -- but at $4 a share, Nokia offers even more potential upside. Add in that dividend, along with its upside, and the (slight) edge goes to Nokia.
Nokia, like RIM, has been struggling in a world of Apple and Android smartphones. However, Nokia is making inroads as it banks its future on the next generation of Windows smartphones. Motley Fool analyst Charly Travers has created a new premium report that digs into both the opportunities and risks facing Nokia to help investors decide if the company is a buy or sell. To get started, simply click here now.
The article Nokia or Research In Motion: Which Is the Better Rebound Candidate? originally appeared on Fool.com.Tim Brugger has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, China Mobile, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.