BlackBerry, Nokia: Recovering or collapsing? By the numbers

Summary:Nine months on, the two former phone and smartphone behemoths are still holding on to the smartphone cliff, hoping not to fall into the mobile market tar pits. What's changed, and can the two still survive? From what we've seen, only one company can—but not because of the other.

Market share figures and statistics are not an exact science, but what the companies say in their quarterly and end-of-fiscal year earnings is often most revealing. 

Last year, both BlackBerry and Nokia looked like they were about to fall into the financial tar pits, and fossilized in time like two smartphone-making mammoths. But thanks to, on the most part, a strong December holiday quarter and respective continued restructuring efforts, the two firms are beginning to see their luck turn.

Profit margins

Last year, only a few weeks after the first "who falls first" piece, it would be the BlackBerry maker which stumbled albeit temporarily into an operating loss-shaped road hole in the road. In short, $RIMM shares were halted on the Nasdaq and the company announced that it was no longer generating profit.

That, in a nutshell, means that it's no longer effectively in financial business. It was a giant loss-making unit, and to stay afloat, the company had to layoff thousands

While BlackBerry has been able to claw its way back into profitability—granted, by the skin of its teeth—Nokia floats in the minus-teens. The Finnish phone maker has slumped below the 0 percent mark—the point of profitability—numerous times, but fell further than ever before in mid-2011. Nokia doesn't generate a profit. According to the figures, Nokia spends about 13 cents (on the dollar) on every device and product that it sells rather than rakes back in.

z-NOK-RIMM-AAPL-profits
Red line represents nine-month ago mark (Credit: YCharts)

Profit margin is an interesting metric. It varies between industries, but by focusing on one industry alone—such as the mobile and smartphone sector—it shows how much the company makes in profit after revenue following costs and taxes. 

Apple, by comparison, famously has a wide margin across its divisions thanks to the price premium the company adds to its products. It's no surprise therefore that Apple keeps roughly 24 cents (on the dollar) of revenue on every product it sells, while BlackBerry keeps about 3 cents. Nokia—well, Nokia is losing money each quarter, even if on an individual level there's a significant markup on the products that it sells. 

But, it's not entirely fair to include Apple in this scenario, because while it develops and builds smartphones, the company does far more than that. Samsung would be the same. While Apple's main business is the iPhone division, showing at least some comparison, it on the whole shows how well a good, profitable company is faring against those that aren't necessarily having a great financial time.

Cash reserves

For BlackBerry, cash has been a more significant worry than for Nokia. BlackBerry is a smaller company with an overall modest staff headcount—particularly since the most recent layoffs. Nokia is large, sprawling with people, has multiple divisions and spin-off and joint-ventures, and has luckily had many years to accumulate a cash pile that would make any multi-billionaire's ego feel somewhat threatened. 

But, the two companies are not equal to one another. 

BlackBerry has 13,400 employees as of December 2012 and a cash and equivalents balance of $2.9 billion, up from $1.5 billion on the same quarter a year earlier—an increase of 93 percent year over year.

Nokia has 97,800 employees as of January 2013 and a cash and equivalents balance of about $5.9 billion, down from $7.5 billion on the same quarter a year earlier—a decrease of 21 percent year over year.

Nokia has around seven-times as many employees, but just shy of twice cash and liquid assets in the bank, and while BlackBerry has almost doubled its cash year over year, Nokia has lost more than one-fifth.

You can probably see which is the healthier company, overall.

Because Nokia is a larger company overall and proportionally a lower cash reserve than BlackBerry, the Finnish phone maker could theoretically run out of money faster. That said, it has human capital, for which Nokia could start hacking away—as it has done and continues to do—at its employee base, cutting away at the fat of the company, and generating more cash.

BlackBerry has already done its cutting—at one point it was a case of "get in on BlackBerry 10, or get out"—while Nokia continues to trim away bit-by-bit as it sees fit. Nokia continues to slash away at around 10,000 by the end of 2013, already handing out the pink slips to 7,000 staff, with many more coming later this year. In total, we're looking at close to 25,000 jobs, or close to 25 percent down from around 130,000 employees it had in 2011. 

Concluding thoughts

On the whole, the two companies are recovering—but they're far from out of the deep end just yet. Both are making a concerted effort to get back on track, but while one firm faces a long recovery with a new line-up of smartphones—a considered 'way out,' if you will—the other has already made that effort and is still sinking.

From the numbers, Nokia is sinking faster than BlackBerry, but the prospects for the Canadian smartphone maker remain unclear. After all, Nokia's Lumia 'revival' has yet to turn the company around, whereas BlackBerry has only just released its saving-grace platform. While early BlackBerry 10 sales look encouraging , we will have to sit and wait until the end of the company's current fiscal quarter before we can gauge its progress.

Nokia may on the face of it be sinking faster than BlackBerry, but BlackBerry isn't out of the woods yet.

If early BlackBerry 10 sales are what they seem, it could be off to a good start. Nokia, however, could still turn things around if it aggressively pushes into China. BlackBerry could also hit the emerging markets hard again, but first-quarter platform delays were only compounded by additional carrier testing in the U.S.; the reason why the hardware keyboard Q10 has yet to hit store shelves.

At what cost are these companies recovering? Think about restructuring and the battering to shareholders' invested cash, and the loss of high-level executives within the C-branch. Nokia has already lost  a few as did BlackBerry . Because human capital converted into cash is often what companies resort to when they can't sustain their numbers, there's no formulaic way to say, "I have amount of employees, I can scrap amount and we'll be safe for z quarters," because it just doesn't work like that.

The two companies have failed their employees as much as they have their corporate shareholders. 

Topics: BlackBerry, Nokia

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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