June 21, 2011 / 2:58 PM / 6 years ago

More pain for Nokia, RIM seen as smartphones get cheaper

(Reuters) - Credit Suisse said competitive pressure in the smartphone industry was likely to increase over the next 12-18 months as a wave of low-end Android phones hits the market and Apple is seen releasing a cheaper iPhone in 2012.

The brokerage, however, said the overall market for mobile phones would continue to grow as low-end smartphones phase out feature phones, a term used to describe phones with less computing power.

Credit Suisse said Apple and Samsung Electronics would be the biggest gainers in the smartphone market and sees increasing signs of vulnerability for BlackBerry-maker Research in Motion, Nokia and Motorola Mobility.

The brokerage downgraded Motorola Mobility by two notches to “underperform.” Shares of the company, which was spun off from Motorola Inc in January, were down more than 3 percent in morning trade on the New York Stock Exchange.

While the growth momentum for phones based on Google’s Android operating system is expected to continue, the brokerage said Motorola Mobility could lose out because of limited exposure to the lower and mid-end of the smartphone market.

An onslaught from rival Android phone makers, such as Samsung and HTC, could also hurt Motorola Mobility’s market share in the United States.

LOW-END SMARTPHONES TO HURT RIM, NOKIA

The brokerage said there was a high likelihood of Apple introducing a low-end iPhone in 2012, but added that “the precise timing is difficult to predict.”

Credit Suisse cut Research in Motion to “neutral” and maintained Nokia at “underperform,” saying a cheaper iPhone could further erode their market share.

Nokia, on Tuesday, released its latest smartphone running on a brand new operating system, which the company eventually plans to ditch, a move that analysts expect could condemn the device to obscurity.

Nokia plans to eventually migrate to Microsoft’s Windows Phone 7 mobile OS.

“While the shift toward Microsoft is probably the right strategy, we believe that the transition will continue to be difficult, especially as smartphone competition increases,” the brokerage said.

Credit Suisse said RIM’s transition to the new QNX operating system will be slow, with significant competition in all price segments, but added that the Canadian company’s shares remained inexpensive.

The BlackBerry maker’s dismal results and failure to deliver exciting new devices have sent its shares plummeting below $26, hitting the lowest level in almost five years.

Last week, RIM admitted delays in revamping an aging smartphone lineup and slashed what most analysts viewed as an unattainable full year earnings outlook. It also said it planned to cut an unspecified number of jobs.

Reporting by Mary Meyase and Himank Sharma in Bangalore; Editing by Roshni Menon, Saumyadeb Chakrabarty

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