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Who Dies First: Nokia or RIMM?

RIMM is probably the most vulnerable


There seems to be no end to the carnage for Research in Motion (NASDAQ:RIMM) and Nokia (NYSE:NOK). In today’s trading, the shares are off 7% and 9%, respectively. While both companies are in deep trouble, is there one that will fare worse?

First, let’s look at Nokia. The company’s CEO, Stephen Elop, seems to understand the seriousness of the situation. When he came aboard last year, he wrote a sobering memo that compared Nokia to a “burning oil platform.”

To put out the fire, Elop struck a transformative partnership deal with Microsoft (NASDAQ:MSFT). On its face, the deal made sense. There would be lots of synergy between the two companies.

Unfortunately, the phones that came out of that partnership — known as Lumias — have been mostly duds. And it looks as though Microsoft will make the situation even worse.

The company’s new mobile operating system, Windows Phone 8, will not be compatible with current smartphone models. In light of this, who would want to buy a Lumia?

RIMM is also suffering from a lackluster product lineup. In the latest quarter, shipments came to 11.1 million, down 21% on a quarter-over-quarter basis. There was an inventory write-down of $267 million.

RIMM plans to launch its BlackBerry 10 devices later this year. But that will probably be too late. According to Morgan Stanley (NYSE:MS) analyst Ehud Gelblum, RIMM will likely see rapid deterioration in its business. The most viable option looks like a sale of the company’s assets, perhaps to Facebook (NASDAQ:FB) or (NASDAQ:AMZN).

So as RIMM and Nokia try to find solutions, rivals have continued to gain momentum. Samsung appears to be getting lots of traction with its Galaxy S III, and Apple (NASDAQ:AAPL) is expected to launch a new iPhone in October. In the meantime, the reach of Google’s (NASDAQ:GOOG) Android continues to expand rapidly.

The weakening global economy may also put pressure on RIMM and Nokia. Goldman Sachs (NYSE:GS) analyst Simona Jankowski has cut her forecast for smartphone shipments. For 2012, she sees a growth rate of 38% instead of 42%.

Both Nokia and RIMM have large cash positions, which should keep them afloat for at least the next year. But RIMM is probably the most vulnerable. It has shown a complete lack of innovation, whereas Nokia has been able to build a fairly decent smartphone. Besides, Nokia will likely continue to get financial support from Microsoft.

So all in all, Nokia should be able to outlast RIMM.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO.  Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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