The past week saw quite a few developments in the mobile sector.
Apple's (
AAPL
) stock fell below $500 for the first time in close to a year on
concerns that the iPhone 5 sales may come in below expectations
when the company releases holiday quarter earnings next week.
Nokia's (
NOK
) 50:50 JV with Siemens, Nokia Siemens Networks, also had more good
news to report following its announcement of Q4 margins guidance
beat last week. The wireless infrastructure vendor touted
another LTE win in the U.S., announcing the completion of U.S.
Cellular's second wave of LTE launches this week. Meanwhile,
Research in Motion (
RIMM
) is up more than 25% over the past week as optimism surrounding a
turnaround gets stronger ahead of the BB10 launch later this
month.
Apple
After peaking at $700 in September 2012, Apple has
declined by almost 30% in four months and is now trading below $500
for the first time in almost a year. A big reason for the current
dip has been multiple press reports about Apple cutting component
orders for the iPhone 5, which have fueled concerns over a
possible slowdown in iPhone demand. Considering that the iPhone is
the single biggest driver for Apple and accounts for over half of
the company's value by our estimates, the intense market
nervousness is understandable. However, while cutting orders
may mean that Apple is starting to see competitive pressures on
iPhone demand, it is not necessarily the only reason why Apple
may have wanted to slow the production.
Firstly, Apple could have placed a huge manufacturing order
for the iPhone 5 initially anticipating supply chain bottlenecks
and that the smartphone may have been difficult to manufacture
with good yields initially. As yields improved over time, however,
Apple may have decided to cut orders to avoid channel overfill and
manage its working capital better. Secondly, coming off a
potentially strong holiday quarter, iPhone demand is naturally
expected to see a slight slowdown in the next quarter. Thirdly,
there has been speculation that Apple could release a new iPhone
every six months instead of its usual yearly cycle. If so, it would
make sense to cool down manufacturing in the quarter ahead of the
new phone's launch. (see
Sticking With Apple's $700 Price Estimate In An
Uncertain Market
)
RIM
After spending weeks consolidating at the $12 levels,
RIM is seeing a renewed surge in buying interest as
investors are turning bullish about the prospects of the new BB10
platform ahead of its launch later this
month. The BlackBerry maker has jumped close to 25% over
the past week as confidence grew that the BB10 devices will be
getting the all-important carrier support necessary for the new
platform to take off. After Verizon (
VZ
), AT&T (
T
) and T-Mobile, it was Sprint's (S) turn to announce that it
will be carrying the upcoming BB10 devices, helping RIM complete a
sweep of the four national carriers in the U.S. Earlier, RIM had
announced that around 150 carriers across the world are testing out
the new BB10 devices in their labs, and that they will be made
available soon after BB10 is officially released on 30 January.
However, while it is crucial that BB10 receive all the carrier
support necessary for RIM to execute a tough turnaround, this alone
doesn't ensure that BB10 will be accepted by customers. The initial
reviews of the platform have been positive (RIM has offered sneak
peeks at its new OS) and the company is looking to launch six new
BB10 devices at various price points in order to get the best shot
at capturing customer as well as developer interest this year.
But, in a smartphone market largely dominated by the iOS and
Android, carving out a niche for BB10 could prove exceedingly
tough. More so, now that the market seems to be getting even more
competitive with Windows Phones' apparent resurgence during
the holiday season. Keeping this in view, we maintain
our $12 price estimate for RIM' stock
, about 10% below the current market price. An upside/downside to
our price estimate completely hinges on the kind of success and
market share gains that BB10 sees in the coming months. (see
RIM Bounces 14% On Optimism Ahead of BB10
Launch
)
Nokia
While the spotlight has been mainly on Nokia's smartphone
business of late as the company negotiates a tricky turnaround with
its Windows Phone-based Lumia series, its oft-ignored telecom joint
venture with Siemens seems to be finally turning the
corner. Nokia Siemens Networks (NSN), the 50:50 JV between
Nokia and Siemens, recently issued positive guidance for the fourth
quarter 2012 announcing that its operating margins (non-IFRS) will
exceed its previous guidance on the higher end by at least 100
basis points. This continues the good show NSN has put on in
recent quarters with a good number of LTE wins in the Asia-Pacific
where Japan and Korea are driving a bulk of the LTE spend
currently. What's more, as the LTE transition continues in full
swing, NSN has managed to snag a couple of important 4G deals with
T-Mobile and U.S. Cellular in the U.S. as well - a region
where NSN's 4G prospects have been pretty dismal until recently.
(see Nokia Gets A Boost As Its Infrastructure JV Returns To
Strength On LTE Wins)
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