RIM's and Nokia's Irrational Rallies

Telecom & Wireless

Published: December 20, 2012 6:51 am

Wall St.’s uncanny new love of battered handset companies Research In Motion Ltd. (NASDAQ: RIMM) and Nokia Corp. (NYSE: NOK) continues. The stocks in each firm are up more than 40% in the past month.

The improvements do not make sense. Each continues to lose ground to leaders Apple Inc. (NASDAQ: AAPL) and Samsung. Optimists might argue that the stock prices were so low that they had nowhere to go but up. RIM has a tiny chance to improve its fortunes with a new BlackBerry 10 line. But there is no evidence that the product will have any features that would make it more attractive than the better selling smartphones. The same is true of new Lumia phones from Nokia, which run the new Microsoft Corp. (NASDAQ: MSFT) Windows mobile OS. Windows continues to have a very small portion of the global OS market, which is controlled by Google Inc.’s (NASDAQ: GOOG) Android.

Another possible cause for the increase in the share prices of the two companies is that they have become attractive takeover targets. The problem with that reasoning is that, if they are targets, why wouldn’t buyers have made offers when the stocks were at their lows.

Douglas A. McIntyre

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