Here’s a look at a couple of the really beaten down players in the mobile phone market: Research In Motion Limited (TSE:RIM) (NASDAQ:RIMM) and Nokia Corporation (NYSE:NOK) (BIT:NOK1V).
RIM is trading today at $9.02, one of the lowest prices since 2004. Nokia Corporation (NYSE:NOK) is at $2.15, below its Feb 1996 low of $2.18.
At the risk of catching falling knives, we take a look at the fortunes of these companies, and whether any value, or how much risk, lurks around them.
First, RIM; Rumors have swirled around the company being likely taken over, and tech biggies such as Facebook Inc (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) have figured as the likely suitors.
Facebook was recently reported to be setting up an engineering infrastructure for building a new phone – what better to way to fast-forward that than to buy an existing phone maker with brand equity? After all, Blackberry is still a brand to be reckoned with in the emerging markets.
Yet doubts remain, and according to an article in Forbes, “though the company has real IP around email delivery,” according to analyst Brian Blair of Wedge Partners, “We don’t see an M&A opportunity near term, mainly because we don’t believe RIM has much to offer.” The analyst goes on to say there is a continuing trend, both within government and enterprise, to replace the Blackberry with the iPhone. With no really hot products in the pipeline to replace its already old line of existing products, and a likely continued fall in revenues, the fundamentals also look grim.
This was reflected also in Morgan Stanley’s (NYSE:MS) downgrade, citing the company at the receiving end of a triple whammy: aging phones, slowing growth in the global smartphone market and reduced off-take as customers put off purchases while waiting for the Blackberry 10.
Nokia was recently upstaged by Samsung as the largest selling overall mobile phone maker. The company’s fundamentals are at their weakest – with at least one analyst predicting it could run out of cash by 2013. In fact, Fitch Ratings lowered Nokia’s debt rating to near junk – BB+, one step below investment grade, in April. Nokia’s tie up with Microsoft Corporation (NASDAQ:MSFT) to make Windows phones may be a silver lining in the cloud, but in all likelihood, it is too little, too late. The awesome competition from Apple and Samsung has taken the game too far away from them.
Given these scenarios, it may be suggested investors leave well alone, and avoid these also-ran casualties of the mobile phone industry. Prices may be very low, but they could still fall further.