There has been some speculation about several government agencies testing new Research In Motion Ltd (NASDAQ:BBRY) BlackBerry 10 devices due to higher security features. Until an agreement is signed between these agencies and Research In Motion Ltd (NASDAQ:BBRY) BlackBerry, it is pure speculation, and the investment should be regarded as such. I do not recommend investors jumping in just yet.
Even if BlackBerry manages to sign up a deal with government agencies, the base of its subscribers is still in the emerging markets. However, sales in Latin America are declining. What’s more is that I believe they will continue to decline. The reason is because the middle-class is rapidly increasing in many countries. A BlackBerry phone is popularly regarded as a device for the lower income group (I am from Mexico, and I lived there 18 years).
Nowadays, the population has higher disposable income, so they prefer to go with more popular brands such as the Apple Inc. (NASDAQ:AAPL) iPhone or the Samsung Galaxy devices.
Overall, the company does not offer a good investment prospects, and investors should steer away from it.
With that being said…
Samsung and Apple are well established in the cellular phone market. BlackBerry and Nokia Corporation (ADR) (NYSE:NOK) are competing for the third place. Although BlackBerry’s subscribers number declined, investors should not think that they are using Nokia devices.
Nokia has also failed to bring substantial innovation to the table. Granted, the 40-plus mega-pixel camera is a nice feature on a cellular phone, but most of the customers like us do not buy the devices to just take pictures. Instead, it has to offer great versatility.
The company is also losing market share in emerging markets, where it used to have a strong presence. The company has also failed to fully penetrate the market in China. Since the middle class is rising, less customers would be inclined towards Nokia.
There is one young lady who has come to my research laboratory (Chemistry, in a University of Texas school) who has an iPhone. According to her, one out of every three students at Beijing Normal University has an iPhone.
Although it may seem exaggerated, it is in concordance with statistics published by Nokia in the last quarter. According to the cellphone maker, the number of units shipped to China declined 63%. Revenue shrunk 21% to $5.8 billion. Also, the number of devices sold declined 21% to 55.8 million units. These metrics are not appealing to investors.
Overall, investors should look elsewhere when they make decisions regarding gaining exposure to the telecommunications industry.
So what to do?
I believe Apple may offer better investment prospects than Nokia and BlackBerry, although the stock has declined from $705 to $400 since September 2012. According to its most recent earnings report, net income rose 10% to $43 billion, or $10.09 per share. Also, iPhone sales rose to 37 million units, compared to 35 million units a year ago.
I believe the decline in Apple presents a great opportunity to grab some shares. The company trades with a P/E of 9.5. Further, the company pays a hefty 3% dividend that just got hiked. In addition, the company has authorized a massive share repurchase program worth $100 billion.
With a strong free cash flow, I have no doubt Apple will succeed in bringing capital appreciation to its investors. Its free cash flow increased 10% to $31 billion.
