BlackBerry, Nokia: Recovering or collapsing? By the numbers

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.

TOPICS: BlackBerry, Nokia

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.

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 fewas 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

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  • We Need Ted Striker

    Shouts Nokia and RIM board.
    Alan Smithie
    • We need math. 2.9M in Q3, 4.4M in Q4. Zack calls it stagnant??

      That despite not being available on Verizon and Sprint and worldwide supply shortages.
      Johnny Vegas
      • Well

        A lot of people are short term thinkers. They don't see bigger pictures, they don't realize that these industries are not sprints, they are marathons. They also lose track of history: 15 years ago, Apple was on its knees, begging for money. If not for a few angel investors, which included Microsoft, dropping a few hundred million to save the company and put Steve Jobs back in charge, there wouldn't *be* an Apple Computer today. There wouldn't *be* an iPhone or iPad.

        Personally, I moved away from iPhone 2 years ago, and have recently upgraded to a Nokia Lumia 920. Between the device's quality and the fantastic OS, there's no chance I'll ever go back to Apple where phones are concerned. I sold my iPad just before they announced they were abandoning support for it 18 months after launch (I just had a feeling they were going to do that), though I may snag an iPad 3 or 4 at some point just for work purposes, but the computer that will replace my Macbook Pro is a Microsoft Surface Pro. Probably not this first version coming out Saturday (though my fiancee, a professional illustrator, is getting one for sure, because it's simply the best artist computer available when you consider the 1024 levels of pressure sensitivity in the screen, the power and portability, and its ability to use high end art apps), I may wait for the Pro 2 which I'm sure will be announced and released in a year or less, but barring some unforeseen innovation, that's the way it's going.

        Anyway, I digress a bit, but the point remains: this industry doesn't run on overnight turnarounds, it takes years to rebuild a business once it's made bad choices and fallen on hard times. Just look at Apple: it took them almost going out of business to finally smarten up. Look also at Microsoft: it took the catastrophe of Windows Vista to make them totally rethink their OS strategy, and now they've got fantastic, fresh, innovative OS's that bring new paradigms to computing.

        Let's just relax and watch. This'll be fun :)
        • Agree

          jasongw - You are the one who should have written this article. Awesome, intelligent reply! Apple and Google do not have a monopoly on great ideas and design.
          Hard Logic
        • I disagree

          Not totally, but in many ways.
          Apple turn things almost overnight and android followed next.
          It's true they were lagging behind for centuries until they came up with the next great and brilliant idea.
          Microsoft can keep trying, maybe they can make it next year, in five or in twenty, ... but so far there is no signs that they are near to become relevant in mobile.
          If it's hard to have great ideas is also hard to fight dominant players. Microsoft could taste the same faith of competitors in desktops pc's, where Microsoft is absolute dominant - I'm not going to say what is best, but I'm sure nobody believes that windows is like 10000 times better than OS2, linux, ....
          • An anecdote does not an argument make . . .

            But still, I ducked into the Microsoft store in Plaza Las Americas today, which is the largest mall in the Caribbean, and it was absolutely crammed with people checking out the Surface Pro. I asked the saleslady how they were selling and she said that the only ones they still had in stock were the 64GB model - and few at that. I asked her how many of the other kind they had in stock to begin with, and she told me 300. Now, you're talking about a Microsoft store on an island with a 68% unemployment rate and an average income of $15,000 - half of the poorest US state. Yet the Surface Pro is selling out in Puerto Rico. Explain that to me, please, if no one wants it.
          • They will sell many

            Compared with iPad very few.
            I always said that surface as a traditional pc will sell a lot. But it will not place Microsoft relevant in mobile devices.
            I've an estimation, 500k for the first 3 months on sale.

            Anyway this is about smartphones...
        • Remember

          We all must remember that people who love Nokia will likely stick with Nokia. And that is a regional likelihood.

          For those that are outside of the regions, Nokia will have to work hard by both selling excellent product and marketing it. Android? Excellent marketers, but lousy products, as you can see by the people that join that platform... and then leave in disgust with good looking but shoddy products.

          Nokia? They're our battleship, here to stay.
      • ZDNet is housepet of Apple

        The analyses of Zack Whittaker is biased beyond believe.

        The figures mentioned in his article are carefully selected to make a point in favor of Apple and against Nokia and to a lesser extend against Blackberry.

        Facts are:

        - Nokia made a profit last quarter (Q4/12),
        - Nokia has the most patents (+ 20.000) of all companies in the mobile tech sector.
        Nokia currently holds the second largest portfolio of US patents (15.987 and 4.453 pending), behind partner Microsoft. In addition. Nokia holds over 20,000 foreign patents and pending applications, with a majority of those being in Europe.
        - Nokia has more profitable entities besides Devices & Services (making phones). Nokia Siemens Networks adds about 48% to Nokia's revenu. "HERE" (formely known as Navteq) is another devision within Nokia which makes navigation in 4 out of 5 modern cars worldwide.
        Apple on the contrary, does not even come close to the mapping and location based services of Nokia's "HERE",
        - Nokia's Lumia 920 simply is much better than the iPhone5 in almost every aspect, besides the amount of unneccesary apps no one ever wanted or used for the last 5 years)
        - that share price is based on the huge profits they made in 2012, which are not likely be feasible in 2013 because of firm competition of .... Nokia
        - Nokia's share price is still based on near bankrupty levels, while Nokia clearly turned the corner last quarter, while Apple share price is based on 2012 record profits which definitly belong to the past, since Apple needs to cut its margins drastically to answer competition.

        It is clear Zack is promoting his declining Apple shares.
        Good Luck Zack!
        • I"m glad i'm not alone in my feelings toward ZDNET.

          ZDNET has been gargling Apple's sac the last few years! I remain hopeful this will change because they used to be a quality tech site you could depend. There are very few ZDNET writers that actually write unbiased articles.

      • We got math, just not very good

        Eg: "Apple keeps roughly 24 cents of revenue on every product it sells," Oops!
        • Not quite 'oops!'

          Let me explain.

          In the piece, I mention profit margins. Here's what I say:

          "Nokia spends about 13 cents (on the dollar) on every device and product that it sells..."

          Then I say, after the graphic:

          "It's no surprise therefore that Apple keeps roughly 24 cents of revenue on every product it sells, while BlackBerry keeps about 3 cents."

          Now, granted there was a graphic in the way, and talking about numbers so enthusiastically might have swayed one's attention. Sure. However, you're right to infer that this should have been clarified in later statements -- even though at the time, I thought it was pretty clear when I wrote it.

          I've edited this to reiterate that I'm talking about X cents *on the dollar*, rather than cents overall. That would, of course be silly.
          • No explanation needed old man.

            Just pulling your chain on a boring saturday. I love your articles! Amusing being called "housepet of Apple" above, I recall you being accused of being in MS's pocket in the past... I suppose being accused of bias equally in all directions is about as close to fine as a journo can get in these bleedin' forums!
          • Here's an interesting thought

            Everyone's biased. I am. I'll tell you this: I own a Nokia 5130 (actually it just stays on the side, I need a U.K. phone while I live in New York) -- and a BlackBerry 9790, which I just swapped for an iPhone 4S (don't ask...) and am production testing a BlackBerry Z10.

            So, where do my loyalties lie? Actually not a flippin' clue, but here's me in a nutshell: "I'm pretty grumpy about everything, but I try and be grumpy about everything equally."
      • Do the same math for q2 vs q4

        4M to 4.4M.
        Sales of q3 were an outlier, WP7 was just sentenced too be killed.
        • Nobody/Nothing gets sentenced "TOO" be killed.

          And your prediction is simply rediculous.

          Lets chat in a couple years.

          You might be leading the "WTF happened???" pack.
          • My predictive keyboard can be as lousy as me

            We both do wrong predictions :)
            I would be happy to be in that group, not so much for Microsoft but for Nokia.

            Hope I'm still on time
            "to be..."
          • If my comparison about quarters is ridiculous

            Why not guessing sales for 2013's q1? :P

            Many are in the bandwagon of those who believe the growth from q3 to q4 of 2012 was amazing and sign of incredible growth for future - not me.

            I start with my educated guess - in q1 of 2013 Nokia will sell between 3.5M and 4M Lumias (and I'm trying to be optimistic), so they will not grow from the previous quarter in my opinion.
            Are you brave enough? :)
      • Re: We need math. 2.9M in Q3, 4.4M in Q4.

        And 4 million in Q2. If you think Q4 was great, then Q3 was terrible. So the net result (trying to be kind) was "stagnant".
  • Perception

    Both companies make excellent products now. Only perception is lacking.
    Sean Foley