Weekly Mobile Notes: Apple’s New iPad, Nokia’s Roller Coaster And Hope For BlackBerry

The past week saw quite a few developments in the mobile sector. Apple (NASDAQ:AAPL) launched the 128GB version of the fourth-generation iPad in a bid to defend its margins and position the iPad as a computer replacement as well. Nokia’s (NYSE:NOK) stock dropped below the $4 psychological mark for the first time since the Q4 earnings boost as rumors about the Indian tax issue took a toll on investors’ sentiment. Meanwhile, BlackBerry’s shares (NASDAQ:BBRY) jumped over 30% during the past week as the company issued a positive note Wednesday regarding initial sales of BB10 handsets in Canada and U.K.

Apple

With its sights firmly set on Microsoft and the huge PC market, Apple added another important update to its growing family of iPads. The iDevice maker recently launched a 128 GB update to its Retina display-toting fourth-generation iPad, doubling the storage capacity of its earlier highest-end tablet for an additional $100 in price. The premium device is not just Apple’s way of protecting margins and ASPs in the wake of the iPad mini’s increasing sales mix. What we are also seeing here is a bigger market share play going on as tablets eat away into PC shipments.

That Apple is looking to upstage the PC giant becomes evident when we consider that Microsoft is launching its own tablet PC, the Surface Pro, in a couple of days. By launching an iPad with the same storage option as the Surface Pro, Apple is effectively positioning the high-end iPad as a computer replacement. In fact, the opportunity that lies in the nascent tablet market is so immense that Apple doesn’t mind cannibalizing its own computer line, the Mac. At $799, the 128GB iPad is just $200 cheaper than the entry-level MacBook Air. The iPad mini’s launch late last year showed that Apple wasn’t going to shy away from providing users options and defending its early market share lead. The 128GB option cements that opinion further. (see Apple Takes On Microsoft With 128GB iPad As Tablets Munch On PC Sales)

BlackBerry

In the latest boost to BlackBerry’s stock, CEO Thorsten Heins said that the new BB10 smartphones are off to a flying start in its home country, Canada. In an enthusiastic statement issued Wednesday, the company said that the new BB10-based Z10 smartphones had the best ever first day launch for a BlackBerry phone in Canada. ^[1] Specifically, sales were “more than 50 per cent better than any other launch day” for BlackBerry in the country. Demand for the new smartphones in the U.K. was also strong, with the company reporting its first week sales to be close to three times better than its previous record in the country.

The strong launch day demand is a good sign of the huge pent-up demand that has built up ahead of BB10’s delayed launch, and that loyal BB users have stuck to the company despite the delays. BlackBerry’s shares surged up by 6% on the announcement and are already up over 30% this month. However, the company refused to divulge details about the actual sales numbers or any context as to how big its previous sales record was.

Considering that BlackBerry’s smartphone market share has been on the wane for quite some time and that the smartphone market has more than doubled in size over the last two years, it is hard to put any kind of context around the announcement. Moreover, these are still early days and BlackBerry will need to ensure that the demand doesn’t fizzle out post the initial euphoria in order to stage a turnaround in its smartphone business – something that could prove exceedingly tough in a smartphone market largely dominated by the iOS and Android.

Nokia

Nokia’s (NYSE:NOK) shares have had a roller coaster ride over the past few weeks, rising to a high of over $4.70 on expectations of a strong Q4 before a series of negative developments pulled the stock down below the psychological $4 mark last week. While the initial sell-off was triggered by an unexpected dividend cut and a cautious next quarter outlook, most of the recent nervousness seems to be on account of unsubstantiated rumors coming out of India regarding a tax-evasion case filed by the IT department there. Quoting a “secret source,” Economic Times, an Indian daily, claimed that Nokia would have to pay about $2.45 billion in IT charges before March 31, of which over $550 million are for tax violations and the rest ($1.9 billion) for transfer pricing issues. (see Nokia Fall Exaggerated As Turnaround Continues At All Divisions)

While the sum quoted is a big figure and could shave almost 13% off our $5 price estimate for Nokia, it is important to take note of what has happened in a similar dispute between Vodafone and the Indian government. The carrier is accused of owing the Indian IT department over $2.2 billion in taxes with regards to its purchase of Hutchison Essar in 2007. Early last year, the Supreme Court ruled in Vodafone’s favor and dismissed the government’s case. However, the tax laws were then amended retrospectively to override the SC’s ruling. Amid criticisms over the government’s approach in this case, India seems to have now agreed to settlement talks with Vodafone. Nokia’s case may not be exactly the same but the precedent shows that damage may not be immediate and, if any, could be limited.

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1. BlackBerry Statement, Yahoo Finance, February 6th, 2012 [↩]