Why RIM, Motorola and Samsung Aren't About to Follow Nokia Down
"Nokia's profits warning does appear to be largely company-specific and is being driven by an uncompetitive portfolio of high-end smartphones," says one Wall Street analyst, who wished to remain anonymous since he has not put out a research note yet. "While it does highlight the intensely competitive environment (driven by Apple, RIM, Android), I don't think it has a direct read across to others like Motorola and Samsung, given its current smartphone share (which is low)."
Indeed. Nokia has been struggling to win over customers in the high-end smartphone sector, in which Apple's (AAPL) iPhone and Research In Motion's (RIMM) BlackBerry phones have dominant shares, and Google's (GOOG) Android-based phones are gaining rapidly. The Finland-based cell phone maker was slow to introduce a high-end smartphone after the iPhone debuted three years ago, and its recent foray into the market with its new N8 has earned it the scorn of critics, who find few differences between its updated Symbian 3 operating system and earlier versions.
"Version 4 is coming out early next year and in theory, it's suppose to be more Apple iPhone like," said Jay Goldberg, a Deutsche Bank analyst. "Historically, Nokia has been good at rolling out new hardware versions pretty quickly, but today it's all about the software [running on the phone] and Nokia has been struggling on that front."
One Loser, Lots of Winners
Meanwhile, Nokia's competitors in the high-end smartphone arena aren't facing those issues. Apple on Tuesday began taking a crush of orders for its iPhone 4, which includes such pumped-up features as videoconferencing. And Goldberg notes that he expects RIMM's earnings to remain intact, because the smartphone market continues to grow and can accommodate both players.
As for Samsung (SSNHY), its earnings may reflect its status as the chief beneficiary of Nokia's woes. The South Korean cellphone maker is the most likely firm to be taking sales directly from Nokia because both cater to the middle to low-end of the market, notes Goldberg. And while Motorola (MOT) is also a player in that segment, it has been hunkering down and focusing on rebuilding its business and relevance through its relationship with Google Android. For now, it seems willing to sacrifice profitability and market share in the process, Goldberg says.
As a result, Motorola investors are likely to remain unfazed by Nokia's second-quarter warning. Goldberg points out that Motorola is doing well so far with its Motorola Droid, for example, receiving strong reviews,
"Nokia is where Motorola used to be three years ago," Goldberg says. "It had a hot design but nothing new for several years."