Nokia is not BlackBerry

Nokia’s in trouble! BlackBerry is in trouble! There is a tendency, especially among Wall Street talking heads and US tech bloggers who don’t understand anything outside of the Valley, to group underperforming companies together. After all, it makes for great headlines and “everyone” knows the mobile battle is between iPhone and Android.

Except it’s not.

Nokia and Research In Motion (the maker of BlackBerry) cannot compare on size. In its most recent quarter, Nokia shipped 113.5-million devices, totaling revenue of €6-billion (close to $8-billion). Even as it shifts its smartphone platform to Windows Phone and practically ensures a dead-end for its current devices, Nokia shipped 19.6-million smartphones. RIM, by comparison, shipped 14.1 million BlackBerry phones. But it’s impossible to establish turnover from this number. Its overall revenue for the quarter was $5.2-billion but this includes enterprise hardware as well as service revenue.

The consumerisation of BlackBerry has caused most to forget that at its core, RIM is a services business firmly integrated in operator networks that also happens to sell smartphones. Think BlackBerry Enterprise Server (BES). This is why, despite its current travails, it still has a lock on enterprises. BES is wedded to Outlook in corporates. The money is not in phones (unless you’re Apple). Nokia, for instance, reports its average selling price of smartphones is €140 ($185). Admittedly, the margins are far better in smartphones than in the lower-end feature phones (average selling price of €32). RIM does not disclose its average selling price, but it’s speculated to be around the $250 mark (and cratering fast).

The stock price performance of both companies has been woeful. On a one-year view, Nokia shares are down 39.5% and Research In Motion stock is down 79%. RIM has traded below book value for a while. But, there is still value in these companies, not least of all because they both own valuable patent portfolios (Nokia more so than RIM). This is why nearly every company out there has had a look at RIM. Nokia, however, still remains too large for anyone to digest easily. The value destruction on the stock market has forced leadership change at both. Nokia appointed an outsider, Stephen Elop as President and CEO in September 2010. RIM founders and co-CEOs Mike Lazaridis and Jim Balsillie finally bowed to investor pressure and stepped down in January. They were replaced by the company’s remaining chief operating officer Thorsten Heins.

It’s in the articulation of strategy by these two leaders that the two companies couldn’t be more different. Elop has a plan and Nokia has consistently delivered against it over the past 18 months. His now famous “Burning Platform” memo shocked the company into action. Make no mistake, its shift to the Windows Phone platform for all its smartphones (and the broader deal with Microsoft) is company-changing. This is a fast-maturing ecosystem that offers the first true competition to iOS and Android. The Nokia of 2014 will be unrecognizable from the Nokia of 2009. And that’s a good thing.

It’s probably too early to judge Heins, but what we’ve heard so far is that it’s pretty much business-as-usual at RIM. At least he’s approaching the job with a more open mind than the founders who seemed to have their heads in the sand. Anything is possible, Heins says. Except the company is dead set on its new BB10 operating system (which has already been delayed). From what has leaked so far, BB10 is good. Except, its 12 months too late.

The only way either of these companies is going to survive is by jumping ahead of the market and offering something so compelling that consumers start seeing their smartphone devices as real alternatives to the iPhone/Android hegemony.

There are indications that Nokia has started achieving this. It won best of show at CES in January in a market its desperate to do well in. One just gets the feeling that BlackBerry is going to show up to the party late again.

There is no space for four different ecosystems. Developers will make sure one dies. Either Windows Phone or BlackBerry OS is going win. I know which my money’s on.



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