Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB), Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) and Apple Inc. (NASDAQ:AAPL) are three of the major players in the industry, but analysts at Credit Suisse see difficult times ahead for the first two.
A team of analysts from the firm issued a report to investors focusing on the smartphone market and the growth that’s expected. They continue to rate Apple Inc. (NASDAQ:AAPL) as outperform and Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) and Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) as underperform.
Corsair Capital, the event-driven long-short equity hedge fund, gained 6.6% net during the second quarter, bringing its year-to-date performance to 17.5%. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter letter to investors, a copy of which of ValueWalk has been able to review, the largest contributor Read More
Growth In The Smartphone Market
The analysts started with some basic statistics about the smartphone market as a whole before looking at each of the three companies’ roles in the market. They expect to see a 20-fold growth in mobile data in the next five years, and they note that iOS users spend two hours every day using their devices.
They said smartphones as a whole are just 24 percent penetrated, and they believe the market will grow 2.4 times in five years, rising to 1.7 billion. They said the $400 and up average selling price smartphone market has tripled since 2010, although they expect growth to begin slowing.
Apple As The Biggest Disruptor In The Market
Since growth in the high end smartphone market is slowing down, they believe Apple Inc. (NASDAQ:AAPL) will indeed release a low end iPhone, which they expect will accelerate the company’s growth while also adding $5 per share in earnings. They also see a low cost iPhone as a big disruptor for competitors like BlackBerry, HTC Corp (TPE:2498), Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Nokia.
In addition, they see Apple as entering into the wearable computing market, which they estimate could be a 425 million unit or $43 billion total addressable market. As such, entry into the market could add $4 per share of earnings for Apple.
Too Little Too Late For Research In Motion, Nokia?
So where do struggling companies like Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) and Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) stand? They see both of these two companies has having put forth too little too late. For BlackBerry specifically, they see the shift in the company’s business model away from services as causing a sharp decline of the company’s high margin revenue stream. They believe the company will continue to see operating losses and possible cash burn, which would follow what we saw in the BlackBerry maker’s most recent earnings report.
They believe Nokia is in the same boat as Research In Motion, citing “limited differentiation for WP8, strong competition and slow portfolio roll out, and continued cash burn ahead.” In light of Credit Suisse analysts’ comments though, it should be noted that Nokia has had a pretty steady stream of Lumia devices coming out one after the other over the last six plus months, the latest of which is set to be unveiled today and will likely change the face of smartphone camera technology forever. The Lumia 1020 is expected to pack a professional-grade camera app in addition to the fancy 41-megapixel camera.