Nokia vs. RIMM

While Apple’s iPhone continues its consumer mania and Android being almost akin to what Microsoft Windows was when it was dominant in the 1990’s, one has to wonder whether there is a market for the low end of mobile phone users.

For example, this includes myself, where I am perfectly happy not having a data package which is slowly making me a rare individual in my age bracket.

So I took a brief look at Nokia (NYSE: NOK) which attempted to compete in the high end market but obviously lost. However, there should still be a space for them in the market – just not at the insanely huge margins that companies like Apple get on every iPhone. It is not like the winner-take-all market of operating systems back in the 90’s – although the application market does drive some component of sales, ultimately if the device has a web browser and is compatible with the local telecom company’s wireless infrastructure it will sell. The question is at what price.

Strictly looking at the numbers, paying a $4 billion enterprise value for a company still making $44 billion in sales seems like a relatively decent margin of error cushion. An additional factor is that the analysts still project Nokia to be losing money this year and barely making anything in the next year. Ideally you’d want to see both of those projections to be even less rosy.

This is why I wouldn’t invest in RIMM at the moment – expectations have not been hammered down enough, although they are getting to the point where your margin of error is somewhat compelling relative to sales and what you are paying.

Disclosure: No positions in either company.