What if No One Wants Blackberry (BBRY...
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Sep
11
Jonathan Yates
What if No One Wants Blackberry (BBRY, NOK, MSFT, AAPL)
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Due to the recent acquisition of Nokia (NYSE: NOK) by Microsoft (NASDAQ: MSFT), Blackberry (NASDAQ: BBRY), the Canadian smartphone maker, is up more than 12% for the month.  This has not been the trend, as the chart below shows that Blackberry is down almost 8% for 2013.  Over that same period, both the Dow Jones Industrial Average (NYSE: DIA) and Standard & Poor’s 500 Index (NYSE: SPY) are higher by double digits.

Investors are obviously betting that another company will buy Blackberry.

But there could be a severe miscalculation by those expecting another firm to acquire Blackberry.  Nokia has a very strong franchise in feature phones, which are those mobile phones that do not have access to the Internet.  Feature phones are very popular in emerging market nations, where the bulk of economic growth will come from in the future.  Nokia sells 200 million features phones with a very strong profit margin of around almost 30%.

The future is also strong for these mobile phones.

It is worthy of note that one of the two new mobile phones just introduced by Apple (NASDAQ: AAPL) is for the lower end of the market..  According to a report by McKinsey & Company, there will be one billion more joining the global consumer class by 2025.   Apple has been trying to capture more of this market, without great success.

Nokia is much stronger at the lower end than Apple.

There is a possibility that no one other firm wants to enter the very competitive smartphone market.  The margins there are being slashed as the competition gets stiffer.  The share price performance of Apple is testament to that.  Those buying shares of Blackberry anticipating that some outside suitor will buy it to enter the vicious smartphone sector could learn a costly lesson.



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