Smartphone Notes: Apple’s iPad Strategy, Samsung’s OS Gains, BlackBerry’s New Device

SSNLF: Samsung Electronics logo
SSNLF
Samsung Electronics

The smartphone industry had a relatively eventful week, with BlackBerry (NASDAQ:BBRY) launching its first Android-powered smartphone, dubbed the Priv, which is widely seen as a last stand for the company’s floundering smartphone unit. Separately, Apple (NASDAQ:AAPL) is reportedly prepping for the commercial launch of the iPad Pro, as it looks to address the professional tablet niche, while bolstering margins for its iPad franchise. In other news, Samsung’s (PINK:SSNLF) fledgling Tizen OS seems to be gaining some traction in the smartphone market. Here’s a quick round-up of the news that mattered for the smartphone stocks that we cover.

BlackBerry Priv Launches Amid Changing Enterprise Smartphone Market 

BlackBerry’s first Android powered handset – the Priv –went on sale last week, priced at about $700. The device combines the firm’s industry-leading security and productivity features with Android’s vast app ecosystem. On the hardware front, the Priv features high-end specs including dual curved display with a QHD resolution, a high capacity battery and a physical keyboard. While BlackBerry’s broader thinking with the Priv makes sense, there are some risks. Firstly, there’s a possibility that the device could be oddly positioned, as individuals who value the app ecosystem enhancements are likely to care less about the device’s security USP as compared to enterprises. This, coupled with the Bring Your Own Device (BYOD) trend, could restrict sales of the Priv to highly regulated verticals where companies still need to provide employees with handsets. Furthermore, competition is also heating up, with Apple strengthening its presence in the enterprise market, driven by increased support for Microsoft applications and its enterprise-focused collaboration with IBM.

  • Trefis has a $8 price estimate for BlackBerry, which is roughly in line with the current market price. We are modelling revenues of about $2.1 billion for CY’15. Our EPS estimate for FY’16 stands at -$0.30, which compares to a consensus of about -$0.43 per Reuters.

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Apple’s iPad Pro And Focus On Margins

Apple is hoping to revive some of the excitement around its iPad franchise with the new iPad Pro, which is expected to go on sale in the U.S. shortly. Apple’s tablet franchise has been struggling over the last few quarters, amid increasing cannibalization from the company’s larger iPhones and a shrinking tablet market. iPad unit and revenue sales were down by 20% year-over-year during Q4 FY 2015 and IDC expects tablet shipments to decline 8.0% this year. [1] Apple’s recent iPad strategy appears to be geared towards boosting margins, rather than just driving volume growth. The iPad Pro, for instance, seems to be targeted squarely at enterprises, creative professionals and power users who can afford the relatively high price tag of the device and its premium accessories. The margin focus is also evident with other iPads. For instance, Apple chose not to refresh its bread-and-butter iPad Air 2 model this year, while maintaining its 2014 price points.

  • Trefis has a $144 price estimate for Apple, which is about 20% ahead of the current market price. We are modelling revenues of about $241 billion for CY 2015. Our EPS estimate for FY’16 stands at $10.41, which compares to a consensus of $9.85 according to Reuters.

Samsung’s Tizen Sees Early Gains, Maintaining Growth Will Be Tough

Samsung Electronics’ Tizen operating system – which debuted on the company’s smartphones earlier this year – has climbed to fourth place in the global mobile OS rankings in Q3 per research firm Strategy Analytics. While the OS’s 0.3% share (1 million devices shipped) remains a drop in the bucket in the context of the broader smartphone market, the gains are notable since this puts Tizen ahead of industry veteran BlackBerry’s OS. ((Samsung’s Tizen Moves Up the Ranks in Smartphone Platform Wars, WSJ, November 2015)) Moreover, it marks a small yet important step in Samsung’s quest to reduce its reliance on Google’s Android software, which has brought about commoditization in the smartphone market. However, notching further market share gains could be challenging. Tizen has been powering lower-end devices ($100-130 price range) targeted at emerging markets, and the appeal is unlikely to extend to higher priced phones until the Samsung is able to build a compelling software ecosystem – which is a crucial factor that determines a smartphone platform’s long-term success.

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Notes:
  1. Worldwide Tablet Shipments Expected to Decline -8.0% in 2015 While 2-in-1 Devices Pick Up Momentum, Growing 86.5%, According to IDC, IDC, August 2015 []