Mobile Weekly Notes: Apple Courts Developers With WatchKit, Samsung Plans To Prune Smartphone Portfolio

November 21st, 2014 by Trefis Team
SSNLF: Samsung Electronics logo
SSNLF
Samsung Electronics

This week saw several interesting developments in the mobile space, with Apple releasing the development platform for its Apple Watch, Nokia planning to re-enter the consumer devices space, and BlackBerry planning the launch of its latest handset. Below we discuss some of these items and their impact on the companies.

Apple’s Introduces WatchKit Developer Tools

Earlier this week, Apple (NASDAQ:AAPL) officially released WatchKit, its development platform for the upcoming Apple Watch, allowing developers to begin creating applications for the device. While several companies, including Samsung, have been participating in the smartwatch space, none of their products have been big critical or commercial successes, plagued by a lack of meaningful use cases and a so-called “killer-application”. Apple is looking to address this issue by getting developers on board well before the watch hits the market, building an app ecosystem that it hopes should help to attract and retain customers on its wearables platform. The Apple Watch is expected to go on sale early next year, with a starting price of $349.

  • We have a $110 price estimate for Apple, which translates to a market cap of around $640 billion. Our price estimate is slightly below the current market price. We estimate the company’s FY 2015 EPS at around $7.21, compared to a consensus estimate of around $7.72 according to Reuters. We are modeling iPhone shipments of around 176 million units for CY 2014, with the number rising to around 195 million units during CY 2015. We estimate the company’s CY 2014 revenues to come in at around $182 billion.
  • Apple’ stock rose 2% through Thursday, driven partly by analyst upgrades.

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BlackBerry Targets Its Core User Base with Classic Handset

BlackBerry (NASDAQ:BBRY) plans to launch its latest handset, dubbed the Classic, on December 17. Although the specifications haven’t been officially released, it looks like the company is returning to its design roots with the device, which will feature the classic BlackBerry form factor – with a physical QWERTY keyboard and menu buttons, along the lines of the BB7 based Bold and Curve. The Classic will run BlackBerry 10 software and will also support Android apps from the Amazon App Store. While it’s evident that BlackBerry isn’t shooting for the mainstream smartphone market with its new launches, the company is looking keep its core base of users engaged, while driving subscriptions to its software and services offerings.

  • Trefis has an $8.90 price estimate for BlackBerry, which translates to a market cap of around $4.7 billion. Our price estimate represents an 11% downside to the current market price. We estimate the company’s FY 2015 loss per share at around $0.62 which compares to a consensus loss range of between $0.09 to $0.99 according to Reuters. We are forecasting the company’s CY 2014 revenues at around $4.22 billion.
  • BlackBerry declined about 9% through Thursday, owing to analyst downgrades.

Samsung Plans To Streamline Smartphone Portfolio

Samsung Electronics (PINK:SSNLF) says that it intends to reduce its smartphone portfolio by 25% to 30% next year. While Samsung is still the world’s largest smartphone vendor, its global market share has declined from 32.5% in Q3 2013 to 23.8%, as its low and mid-range handsets have been facing stiff competition from Chinese manufacturers such as Xiaomi and Lenovo while its high-end models have had to compete with Apple’s wildly successful large-screen iPhones. [1] The move should allow the company to prune down manufacturing costs and potentially improve inventory management, while increasing the number of components shared across different models. The company’s current smartphone line-up is somewhat cluttered and is likely to be confusing for potential buyers. For instance, the company’s latest flagship Galaxy S5 alone comes in 5 different variants. Streamlining the line-up should help to better position and market products to customers.

  • Trefis has a $1,170 price estimate for Samsung, which implies a market cap of around $172 billion. Our price estimate is slightly ahead of the current market price.
  • Samsung Electronics, which trades on the OTC markets in the U.S., remained flat at $1101 through Thursday’s trading.

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Notes:
  1. Worldwide Smartphone Shipments Increase 25.2% in the Third Quarter with Heightened Competition and Growth Beyond Samsung and Apple, Says IDC, October 2014 [↩]