BlackBerry, Nokia: Recovering or collapsing? By the numbers
I was optimistic for a time. (Yes, it happens. Rarely.)
As a kid growing up, I used a Nokia, as did practically everyone else. Kids, adults and business folk alike all used a Nokia for some time during the mid-to-late '90s. And then the BlackBerry craze began during the mid-to-late 2000s, and I, like every other teenager, student and Generation Y'er during the latter part of the decade, owned one.
And then Apple and Google came along and stamped on the market with a range of revolutionary touch-screen phones. Progression is progression, and we can't begrudge the iPhone and Android makers for advancing the stale and stunted state of the mobile market.
Since then, the two companies have faced almost certain demise, either at one time or another or even multiple times. Three fiscal quarters later since global media 'death watch', deals made between companies, product delays and eventual launches later—little has actually changed on the face of it.
And seemingly arbitrarily, nine months later—or specifically, 276 days—since we last looked at the two companies' numbers in tandem, we thought it might be worth taking another look at the two companies to see if—just if—the two can continue to hold on to the edge of the smartphone cliff for a little while longer.
And it's not all good news, folks.
Market share
BlackBerry (formerly RIM) held a 6.7 percent sales share for the whole of the first-quarter of 2012, down by 29.7 percent year over year, according to IDC figures. Meanwhile, comScore said BlackBerry had a platform share of 12.3 percent, declining by 3.7 percentage points over a three-month period.
Nokia had an 8.2 percent sales share of the smartphone for the first-quarter of 2012 according to IDC, but this was down by more than 50 percent year over year. That said, the feature phone market was still booming for Nokia, holding a 20.8 percent share in second place behind Samsung, which had 23.5 percent. Nokia's feature phone share was still falling by 23 percent year over year, however.
Nine months later, BlackBerry has been relegated to the "others" section in IDC's latest fourth-quarter of 2012 figures, as was Nokia. Figures weren't broken down but both pegged below the 4.3 percent market share figure, where fifth-place Huawei currently stands.
Both BlackBerry and Nokia's market share have declined—in both smartphone and feature phone categories—despite aggressive pushes to the developing and emerging markets, notably Indonesia for BlackBerry, and Africa and China for Nokia.
Nokia retained its second place hold on the feature phone segment, but declined by 23.9 percent year over year, with just 17.9 percent of the market.
Both have lost significant market and platform share, but Nokia is still holding on desperately to its feature phone foot-hold. Yet, this will come back to haunt Nokia as its smartphone segment remains all but non-existant, and it will no longer develop cheap-to-build Symbian-based devices. It looks like—at least on the face of it—that Nokia is ramping up its already-slow smartphone effort while ditching its declining yet still lucrative feature phone unit.
BlackBerry, meanwhile, has seen its "best performance" for the first week of sales but did not share sales figures. Numerous retailers speaking to ZDNet—including U.K. cell network O2 and phone retailer Phones4U—confirmed that their stock had to be replenished, reaffirming BlackBerry chief executive Thorsten Heins' comments that sales are on the whole good.
Sales figures
Nine months on, sales are still not where they should be, at least for two companies clinging on for dear life and trying to revitalize general interest in their products and services.
For BlackBerry, the numbers are quite simple. Quarter on quarter, BlackBerry is shipping fewer devices. In Q4, the company shipped 11.1 million smartphones and lost two executives. In Q1, it shipped 7.8 million smartphones. In Q2, the firm touted 80 million subscribers worldwide, but only shipped 7.4 million smartphones during the quarter. And in Q3, BlackBerry shipped only 6.9 million smartphones.
The pattern is clear: BlackBerry smartphone shipments are going down significantly quarter-on-quarter.
BlackBerry has cumulatively shipped, in the nearly two years the device has been on sale, around 1.49 million PlayBook tablets. By comparison, even in Apple's worst iPad selling quarter—the third quarter of 2010—the Cupertino, Calif.-based company sold double that with 3.27 million iPads. And that's just in one quarter alone, and the first quarter the iPad was on sale, where nobody knew if they should buy one or not.
Nokia is a tale of two fronts: a smartphone unit—which includes the Windows Phone-powered Lumia range, but is not limited to it—and a feature phone unit, that is slowly being wound down.
Nokia sold 4.4 million Lumia smartphones during the fourth-quarter of 2012, at the last earnings report. Compare this to previous quarters and Lumia sales figures remain stagnant at best. Nokia sold 4 million Lumia smartphones during the second-quarter of 2012, and a meager 2.9 million Lumia smartphones during the third-quarter.
What's likely going to happen is that Lumia and other 'smart device' sales will remain flat or slightly above or below by a few percent quarter-on-quarter, while at the same time feature phones that sit close to smartphone 'status' will continue to dwindle, particularly in emerging markets.
By comparison, according to Strategy Analytics, Samsung sold 55 million smartphones during its third quarter. Apple sold 26.9 million iPhones during its fourth quarter.
Single figures just aren't going to cut it.
Share price
Share price and market caps are not the best indicator of how much a company is 'worth,' per se, but it's nonetheless gives an idea of how investors, shareholders and Wall Street feels about a company's state of affairs.
Nokia ($NOK) went from a pre-global recession share price high of $39.71 in November 2007 to a record low of $1.71 in July 2012, representing a massive 95.6 percent drop in price in just five years. Not only did the global recession kick ten bells out of the Finnish phone maker, it failed to innovate in the then-developing smartphone market.
Nokia's market cap has recovered marginally from its record low point in 2012 and gained back mostly what it lost during the last nine months. Nokia is roughly valued at about $15.34 billion based on its current market cap.
Meanwhile, BlackBerry ($RIMM—which now trades as $BBRY) went from a post-millennium share price high of $144 in June 2008 to a record low of $6.47 in September 2012, representing a 95 percent drop in price.
BlackBerry's market cap has recovered the most from its record low price of $11.82 in September 2012 and surpassed the price it dipped to nine months ago to about $16.80—a 42 percent increase in just three fiscal quarters. BlackBerry is roughly valued at about $8.41 billion based on its current market cap.
Page 2: Profit margins, cash, and concluding thoughts -->
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.
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 x amount of employees, I can scrap y 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.