If you want to know how to lose $80 billion in market cap all you have to do is ask Research In Motion Ltd (NASDAQ:BBRY). BlackBerry (formally known as Research in Motion) fell from grace as Apple Inc. (NASDAQ:AAPL)‘s iPhone stole away its customers and as corporations started implementing “buy your own device” programs. Back in the second quarter of 2008, Research In Motion Ltd (NASDAQ:BBRY) was riding the smartphone trend to new highs, getting 53.6% of the US market, according to IDC.
Oh but how the mighty have fallen, with IDC reporting that BlackBerry is in fourth place in the world (Microsoft Corporation (NASDAQ:MSFT)‘s Windows OS is now placed third) and that the company’s US market share is only 5.1% (according to comScore). In order to reverse this, BlackBerry has released two new smartphones, the Z10, which is touch-based, and the Q10, which has a keyboard.
The Q10 could be Research In Motion Ltd (NASDAQ:BBRY)’s savior as it can appeal to older users once again with a physical keyboard, which is easier for some, primarily those in the 40-or-older category, to use. The Q10 release was delayed in the US until June, so some could say that there is still some hope left.
Earnings bust
BlackBerry posted earnings last Friday and missed expectations by posting a surprise loss for the quarter on lower-than-expected revenue. Research In Motion Ltd (NASDAQ:BBRY) posted a loss of $0.13 a share versus expectations for an $0.08 profit on revenue of $3.1 billion, which missed by $300 million. BlackBerry sold 6.8 million smartphones in its latest quarter, with 2.7 million of them running on BlackBerry’s newest OS, BB10. BlackBerry shares crashed 27.5% on the news, and were down more in after-hours trading.
Still hope for a turnaround?
BlackBerry’s hopes rest on the continued adoption of BB10 and strong sales from the Q10 in the US. Part of the bull case for BB10 is that the Q10 has a physical keyboard, which could appeal to an older demographic as most smartphones have no physical keyboard. This could enable BlackBerry to win back corporate clients and add to its 76 million subscribers.
Some 40% of BlackBerry’s revenue comes from software and services. But if smartphone shipments continue to fall, the company will start losing subscribers and have revenue erode. This would spell doom for BlackBerry and would crater its stock price even further. In Q1 2012, there were 9.7 million Research In Motion Ltd (NASDAQ:BBRY)’s sold, which fell to 6.3 million in Q1 2013. The 6.8 million does represent a 500,000 increase quarter-over-quarter, but it might not be enough to stop clients from leaving.
The other turnaround
As Research In Motion Ltd (NASDAQ:BBRY) shipments fell as the company lost ground in the smartphone market, this other beleaguered phone maker saw its turnaround take effect. Nokia Corporation (ADR) (NYSE:NOK)‘s Lumia handsets, which run on Microsoft Corporation (NASDAQ:MSFT)’s Windows Mobile OS, are beginning to gain some steam. In the last quarter of 2012, Nokia Corporation (ADR) (NYSE:NOK) sold 4.4 million Lumia handsets, and in the first quarter of 2013 that number climbed to 5.6 million.
Management has guided for at least 7 million being sold this quarter. According to Kantar Worldpanel, Windows is now 5.6% of the US market, with 85% of those phones being made by Nokia. Microsoft Corporation (NASDAQ:MSFT) has teamed up with Nokia to enter into the area, which is heavily dominated by Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG). Together Apple Inc. (NASDAQ:AAPL)’s iOS and Google’s Android control 92.3% of the smartphone market.
Nokia’s turnaround effort seems to be working, and Microsoft Corporation (NASDAQ:MSFT)/Nokia Corporation (ADR) (NYSE:NOK) have a good chance of taking 5% of the global smartphone market and 10% of the US market by the end of 2013. The roll-out of the 928, 925, and the super cheap 521 (which costs $150 in total) will boost Nokia’s market share, and Microsoft will make money on the OS licensing fees.
Microsoft Corporation (NASDAQ:MSFT) is desperately trying to get into the mobile arena, both with its Nokia venture and by lowering licensing fees for PC/tablet manufacturers. Now companies like Dell Inc. (NASDAQ:DELL) can sell a PC/tablet combo for $400, which could turn around flagging PC sales and boost revenue for Microsoft. While it will take a small hit on its margins, in the long run it is a good move for Microsoft.
The big players
Google’s Android controls 75% of the global smartphone market, which is up sharply from 59.1% in the same period last year. In Q1 2012, there were 90.3 million smartphones running on Android shipped, and there were 162.1 million for Q1 2013. This explosive growth is why Google could hit $1,000 a share by the end of 2013.
Apple Inc. (NASDAQ:AAPL) had 23% of the smartphone market in Q1 2012 and by Q1 2013 that had dropped to 17.3%. This drop is largely due to Apple Inc. (NASDAQ:AAPL)’s lackluster iPhone 5 upgrade (which wasn’t viewed as evolutionary as compared to other iPhone upgrades) and the delayed iPhone 6 upgrade.
The iPhone 6 is due to come out this fall, with the possibility of a cheaper iPhone as well for emerging markets. The iPhone 6 and a cheaper iPhone could definitely boost Apple’s market share and stock price and push Apple back over $500 a share. Growth in the tablet market could also provide a strong tailwind for both Google and Apple Inc. (NASDAQ:AAPL), as well.
Final thoughts
I’m bullish on one smartphone turnaround, but it’s not Research In Motion Ltd (NASDAQ:BBRY). Unless it can turnaround US sales and gain 5% of the market, it will continue to see declining revenue and more losses. There is only room for one turnaround play for the moment, and that is Nokia. Nokia has been steadily gaining market share in the US and in the world, and has a very good chance to take 5% of the global market by the end of the year. Microsoft Corporation (NASDAQ:MSFT) will also benefit from Nokia’s market share gains and will soon be making money off the venture, which could provide a sentimental boost for the company and boost its stock price a bit.
Google Inc (NASDAQ:GOOG) and Apple are both good investments, but Google Inc (NASDAQ:GOOG) has Apple beat. Google is taking more and more of the smartphone and tablet markets each day, it is moving into the wearable-technology market with Google Glass, it has a driver-less car, and it’s going to make a game console (which is Microsoft’s turf). In order for Apple Inc. (NASDAQ:AAPL) to start growing again, it needs to sign on more telecom companies, like China Mobile, to sell the iPhone and it needs to release a new iPhone.
Research In Motion Ltd (NASDAQ:BBRY) still has a small chance with the release of the Q10 in June for the US, but that chance is getting smaller and smaller with each day that passes. Once you start burning through your cash, you reduce the value of the company as the balance sheet deteriorates and investors lose hope.
The article Is It Game Over for This Smartphone Maker? originally appeared on Fool.com and is written by Callum Turcan.
Callum Turcan owns shares of Nokia and Microsoft. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Callum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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