What Nokia Corp (ADR) (NYSE:NOK) and BlackBerry Ltd (NASDAQ:BBRY) Have In Common

- January 2, 2017

nokia_blackberryNokia Corp’s (ADR) (NYSE:NOK) acquisition of Alcatel-Lucent SA (ADR) (NYSE:ALU) is creating the kind of shareholder value we always wanted via cost synergies, cross-selling opportunities, and innovation. With telecom spending at the bottom of its cycle and Nokia having many exciting products in its pipeline, the future has never looked brighter for NOK stock. Meanwhile, BlackBerry Ltd (NASDAQ:BBRY) is throwing spaghetti all over the walls, just hoping that something sticks.

It is exhausting to keep track of all the ways that BlackBerry has changed over the last few years. Unlike NOK who had a legitimate segment aside from mobile phones, BlackBerry’s success in software and services goes hand-in-hand with its ability to keep consumers glued to its ecosystem, or at least using its hardware. BlackBerry’s failure to do so is reflected in BBRY stock price.

That said, BBRY tried to step away from smartphones after its latest failure with Android powered hardware, but it didn’t take long for the company to realize the need. Now, BlackBerry is trying its luck at outsourcing its smartphones, hoping to reduce costs and possibly slow the deceleration of market share.

Just for the record, I thought BlackBerry’s Priv and Passport were great looking phones, with terrific reviews. The problem has become abundantly clear, though: Apple and Samsung’s handle on the smartphone industry is so tight that there really is no room for a legitimate No. 3. After Apple and Samsung, the smartphone market is nothing short of fragmented depending on region and brand.

What Nokia and BlackBerry have in common

Despite BlackBerry’s need to make smartphones at least somewhat relevant, NOK does not need smartphones due to its complete end-to-end solutions in the telecom equipment space. Nokia has a $25 billion business without smartphones whereas BBRY has watched revenue dwindle from nearly $20 billion in 2012 to an expected $1 billion next year. Hence, BlackBerry needs smartphones; Nokia does not.

Regardless, NOK can not seem to quit adopting a “see if it sticks” mentality with smartphones. Recently, it was announced that Nokia is making yet another move in the smartphone space with its Nokia P phone. There are also a number of reports that Nokia will launch up to five new Android powered phones in 2017. The big question is why?

Nokia has a cash strong business and NOK stock pays a dividend of 6%. There is no reason for Nokia to take another shot in the smartphone space. However, like BlackBerry, Nokia can’t help itself. Given the very bullish outlook for NOK stock, let’s hope management doesn’t get too aggressive or spend too much on its addiction, being like BlackBerry in the smartphone space. After all, everyone knows it won’t work.

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