The high-tech world is still buzzing after Nokia Corp (ADR) (NYSE:NOK) and BlackBerry Ltd (NASDAQ:BBRY) showed off new handsets at last weekend’s Mobile World Conference. However, I’m not sure nostalgia for candy bar phones and keyboard PDAs draws the right kind of attention to either company.
For one, NOK never really left the “dumb” end of the phone market behind, so the company’s grand “return” with a new version of its near-indestructible 3310 handset — popular in 2001 at a price around $120 — is only a shock to people who stopped paying attention, which they did for a reason.
Granted, the feature phones that NOK recently pulled back out of Microsoft Corporation’s (NASDAQ:MSFT) orbit accounted for 9% of the category last year, but that No. 2 share behind Samsung Electronic (OTCMKTS:SSNLF) only added up to 35 million handsets, or at best 2% of the global phone market.
A Lesson in Scale for NOK Stock
Sure, it’s remotely possible that the return of the 3310 at $50 will somehow dramatically reverse 16 years of technology progress, and be enough to convince a new generation of back-to-basics consumers to trade in their smartphones, I find it unlikely.
I just don’t see that happening here in numbers that even double NOK’s market share, and even if it does, an extra 35 million $50 handsets sold close to cost really isn’t going to move the needle for NOK stock. Even if the company manages to book half the retail price on each phone as revenue, it’s going to take 120 million of them to add 10% to the top line.
That’s the real lesson of scale here. NOK never went away; it’s still a big company, built on the chassis of the old Alcatel and Lucent networking businesses. Now that it has its phones back from MSFT, management needs to deploy them to embrace the future and expand on the role the company wants to play in the Internet of Things (IoT).
To me, that means developing phones that don’t compete with Apple Inc. (NASDAQ:AAPL) or Samsung for consumer pocket space, but ones that instead let smart devices communicate with each other. Consider that, in a world of billions of $50 machine-to-machine data relays, the market becomes very interesting for NOK stock investors.
It’s a similar story for BBRY, which was evolving nicely into an IoT proposition, until now. We may feel nostalgic for the days of a ubiquitous business BlackBerry, but that era was over more than a decade ago. We’ve since learned to type on virtual keyboards.
The question I have about the next generation of BBRY devices revolves around what great things they can do to win consumers away from the iPhones and Androids that already dominate the market. They need to trigger a revolution and not just recapitulate the past.
The bottom line is, as interesting as it was to get a blast from the past from these two companies, I just don’t see this strategy being a boon for either stock right now.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
