Weekly Mobile Notes: Apple, RIM and Nokia

The past week had quite a few important happenings in the mobile sector. Apple (NASDAQ:AAPL) announced its opening weekend iPhone 5 sales which, at 5 million, turned out to be below market expectations and sent the stock down almost 6% from its all-time highs. The stock has since rebounded as the iPhone 5 teardown analysis showed the presence of a Qualcomm (NASDAQ:QCOM) chipset that is compatible with China Mobile’s proprietary 3G network, implying that a deal between the two giants is very much on the cards. Research in Motion (NASDAQ:RIMM announced a set of mixed results for Q2 FY 2012 towards the end of the week as the company slumped to its second consecutive quarterly loss but managed to hold on to its precious cash balance that could help it see through this increasingly tough BB10 transition period. In between, we had Nokia (NYSE:NOK) sneak in with an announcement of its own regarding the introduction of two new touchscreen Asha handsets for the emerging markets.

Apple

Apple on Monday announced that it has sold 5 million units of iPhone 5 during the first three days of sale since the September 21st launch last week. While this figure is about 25% higher than the 4 million iPhone 4S units it had sold during the opening weekend last year, it is a sharp deceleration from the high sales growth recorded back then. Apple’s opening weekend sales for the 4S last year had grown by an astounding 135% over iPhone 4 which, in turn, had seen 70% higher sales than the 3GS. What is even more disappointing is that Apple has also increased the number of launch countries from 7 to 9 this year, which indicates that Apple has actually sold fewer number of iPhones per country in the opening weekend this year than during the iPhone 4S launch.

While the numbers were undoubtedly below market expectations, we believe it is unwise to read too much into the initial sales figure as it may not be an appropriate gauge of demand. Considering the huge pre-order demand for the iPhone 5 (Apple saw twice as many pre-orders for iPhone 5 as the 4S on the launch day), we believe that an increasing number of people are choosing to adopt the pre-order route this time. This could have skewed the opening weekend sales downward since Apple doesn’t record sales until the customer has accepted delivery of the device. (see Overwhelming Pre-Order Demand Could Be The Reason Behind Apple’s Disappointing iPhone 5 Sales)

With the iPhone 5 finally in people’s hands, a iFixit teardown revealed that the smartphone has Qualcomm’s MDM9615 baseband for LTE support. The chipset co-incidentally also supports China Mobile’s 3G network, paving the way for the long awaited deal between Apple and China Mobile. This is momentous for both companies since, without the chipset, investors would have had to wait until China Mobile launched the LTE network it is currently trialing to see Apple release the iPhone on the carrier. Apple will still have to work out the terms of a subsidy deal with China Mobile but, looking at what’s at stake, we believe it is only a matter of time before that happens. (see Apple Can Ride China Potential Past $800 With China Mobile’s Support)

RIM

RIM announced its Q2 FY 2013 earnings on September 27th and as expected, the results were not very pretty. The company reported a net second quarter loss of $235 million as compared to earnings of $329 million a year ago. Revenues were down 32% from the year-ago quarter, but saw a marginal improvement sequentially as an improving sales mix towards the higher end BlackBerry Bold handsets offset the overall decline in volumes.

More importantly, RIM managed to increase its cash balance by about $100 million during the quarter. With BB10 delayed until the first quarter next year and competitors such as Apple and Samsung expected to continue to munch on RIM’s market share until then, we said in our earnings preview that RIM should be looking to conserve its cash balance and hold on long enough for the BB10 devices to start seeing positive demand. It is therefore a good sign that despite reporting net losses for two quarters straight, the company is still generating cash by executing on its CORE program well. (see RIM Manages To Conserve Cash As It Prepares For BB10 Launch Next Year)

Nokia

Nokia hasn’t given up on Symbian just yet. While it is betting on Microsoft’s Windows Phone for its Lumia brand of high-end smartphones, its legacy Symbian platform still drives most of the feature phone volumes in emerging markets. However, with the proliferation of cheap Google (NASDAQ:GOOG) Android based quasi-smartphones, Nokia is increasingly feeling the pinch of rising competition and declining prices for its older S40 models. In a bid to combat the pricing pressure and defend its market share in emerging markets, the Finnish handset maker has bolstered its Asha portfolio of handsets with two new touchscreen phones, the Asha 308 and the Asha 309. (see Nokia Introduces Two New Touchscreen Asha Handsets Targeting Emerging Markets)

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