Analysts at Nomura Equity Research believe that cheaper Android Phones will negatively affect the market share of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry’s in emerging markets.
Nomura Equity Research analysts Stuart Jeffrey and Woo Jin Hoo noted that Asia Pacific (APAC) is driving 70 percent to 79 percent of the global smartphone market growth. According to them, Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry accounts for only 1 percent share or generates 17 percent of its sales in the region.
The analysts projected that sub-$100 and 5-inch Android phones will capture 80 percent of the growth opportunity in the global smartphone market. They believe that local Chinese vendors launching the “good enough” sub-$100 Android phones will drive the growth.
Jeffrey and Hoo emphasized, “Android is capturing 80 percent of the growth opportunity due to a full breadth of price points, low vendor margin expectations and near monopolization of local application development in Asia, leaving little scope for Blackberry to take share.”
Blackberry (BBRY) Doesn’t Have A 5-Inch Screen Smartphone
In addition, the analysts said that Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry doesn’t have a 5-inch screen smartphone, which is dominant in the higher price point. According to them, even if the Canadian smartphone maker launched a 5-inch device, it will have a limited traction because of pricing pressure.
Jeffrey and Hoo observed that the position of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry in Latin America, Middle East, and African regions is unsustainable. The company generates 33 percent of its sales from the region, which represents only 13 percent of the global sales. They explained that the company’s high share in the region is “BB7-based and it is similar with the share of the Nokia Symbian in region a few years ago.” They emphasized that the “lack of alternatives supported an inflated market share.”
According to them, the share of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry in Latin America, Middle East & Africa is expected to decline significantly due to the fact that Chinese vendors are increasing their exports of sub-$100 in the region.
Jeffrey and Hoo believe that the long-term prospects of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry remain challenging because it has no unique offering, no economies of scale, the differentiation in value chain is limited, and substitute products (iPhone and Android) are increasing penetration as they obtained security clearances from more government entities.
On the other hand, the analysts expect Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry to report solid near-term results due to the wider distribution of the BB10 devices globally, channel in-fill for Q10 and Q5, and possible enterprise replacement cycle driven by the Q10.
Jeffrey and Hoo wrote, “While we struggle to see value in Blackberry in the long run, we believe the above dynamics are likely to keep Blackberry unit sales trends positive in the next few quarters.”
The analysts maintained a neutral rating and maintained their $10 price target for the shares of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)/Blackberry. The stock price of the company is trading around $14.56 per share on Thursday afternoon in New York.