HAUKE: Apple faces competition in mobile phone wars

The cell phone wars (key up the Darth Vader heavy breathing) should almost be to the point where we’ll see the equivalent
of the head-to-head taste-testing that Coke and Pepsi used for years to bash each other’s brains in.

For
a while, everyone seemed to think the iPhone was unassailable, but Motorola, Google and Verizon are about to give it their
best shot. And investors are placing their bets now.

The early days of cell phone penetration were marked by bulky
suitcase-size wireless devices, self-important people showing off, and Motorola. These guys dominated the market for almost
20 years until the mid-1990s, when companies like Ericsson and Nokia were introduced to the American consumer.

Nokia
really took the ball and ran with it as it covered the global market and left Motorola in its wake. From 1996 until early
2000, Nokia stock went from just under $2 a share to more than 50 bucks. Motorola stock rose about 1/10th of that amount in
the same time frame.

A few years ago, Motorola introduced a phone called the Razr that brought the company a little
respectability in the stock market. Motorola was holding its own until, bam, it ran straight into the brick wall called Steve
Jobs. It hasn’t been the same since.

Up until a few months ago, Apple helped turn Motorola into a mere quivering
reflection of its former self. The stock fell to less than $3, a level last seen in 1987. Meanwhile, the iPhone grabbed market
share at a lightning pace, just crushing everything in its path.

Apple stock shot right up along with its increasing
revenue until it became one of the few stocks to overtake its pre-2008 crash levels. History was being made in the cell phone
industry and investors were totally caught up in the battle.

Fortunately for Motorola, there were a few small areas
Apple couldn’t address. Even though Apple completely mugged AT&T in the deal, Ma Bell was granted exclusive carry
rights on the iPhone. That’s a problem because AT&T’s network is slower than Verizon’s and doesn’t
offer as much coverage.

That’s the crack in the armor that is currently being exploited. Motorola is now
making a phone using Verizon as the carrier and Google as the operating system. This new phone, the Droid, got excellent early
reviews, and Apple’s stock fell a quick 11 percent in response. Motorola stock has been heading higher and it looks
like further upside is possible in the coming months.

I don’t think the iPhone is going to be severely damaged
by this new introduction. There is a serious passion among users, and Motorola has developed a reputation as a laggard over
the last few years. It looks like the biggest loser in this war is going to be Research In Motion Ltd., the maker of the BlackBerry
systems. Its stock is tanking in a way that could foreshadow real problems. RIMM seems to have a strong built-in corporate
base, but its stock price climbed so high that it might have to deliver results that will be nearly impossible to achieve
under this new competitive scenario.

Speaking of problems, the stock market finally experienced the typical October
sell-off, but it waited until the last few days of the month to kick in.

It wasn’t that harsh, and we may
experience more downside pressure over the next few weeks, but the market should see at least one more new high within the
next two or three months. The primary uptrend from March is still intact, although it certainly got dinged up recently.•

__________

Hauke is the CEO of Samex Capital Advisors, a locally based money manager. His column appears
every other week. Views expressed here are the writer’s. Hauke can be reached at 203-3365 or at keenan@samexcapital.com.

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