<

Nokia’s ASP and gross margin bodes well for BBRY

NOK RIMM 01.31.2013Enlarge GraphAverage selling prices (ASPs) are a key input for revenue in the mobile device industry as outside of the number of mobile units sold, the average price level of those units will greatly impact revenue and operating margins. As outlined in our article, Average selling prices for mobile driven by new technology, we highlight that the ability to raise prices by a mobile device manufacturer is likely driven by the introduction of new functionality in handsets. In the most recent quarterly result from Nokia (NOK) on January 24th, the improved results reflected the positive impact of the company’s new Window’s based Lumia phone as the new handset did raise Nokia’s ASPs, and as a result, the company’s gross margins. This dynamic bodes well for Blackberry (BBRY) as it continues with its new Blackberry 10 launch as ASP improvements are also expected.

Within the company’s recent fourth quarter report, Nokia reported an increase in both feature phone and smart phone sales driven by recent new product launches including the Lumia handset. Total smart phone sales totaled 6.6 million units in the quarter, a 300,000 unit increase from the 6.3 million handsets sold in 3Q 2012. This was the first time in three quarters that Nokia increased its smart phone sales as unit sales had been in decline since 4Q 2011. Importantly, Nokia’s average selling price also rose from $155 per unit in 3Q 2012 to $186 per unit in 4Q as new, more expensive, Lumia sales blended ASPs higher.

The ASP rise, and also the gross margin improvement in the Nokia quarter, bodes well for Blackberry which launched its new Blackberry 10 handset this week. As outlined in our article, All important Blackberry 10 launch for RIMM upcoming, we note that most Street analysts are assuming an ASP increase which is leading to improved earnings estimates as a result of the new launch for BBRY. The Blackberry 10 launch yesterday was met with some enthusiasm on the functionality, but some disappointment on it’s market timing. BBRY sent the message that one of the functions that sets it apart from Apple (AAPL) and Samsung is that its new phone allows users to access data from multiple applications on one screen which allows a user to create separate work and personal spaces on the phone display. The disappointment for BBRY shareholders, which sent the stock down over 15% in two trading sessions, is that the new handset won’t be available in the U.S. market until mid March, which is well behind the launch in smaller markets like the U.K. and Canada within a week.

The initial results of Nokia display that new technology has risen average selling prices, which is a good indication for the higher ASP’s now expected in the upcoming BBRY quarter.

The Realist Discussions