Why RIM Needs to be Removed from Your Portfolio
Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What is it that an investor wants at the end of the day? Value for his hard-earned money! So, every time we analyze a stock, we need to see if the stock is doing justice to the price we pay. This is where the troubled BlackBerry maker Research In Motion (NASDAQ: BBRY) falls short heavily.
There was a time when this phone maker took the world by storm thanks to its then-ultra-modern platform with then-state-of-the-art emailing platform and best in class security features. The full qwerty handsets became a necessity for any business person and these ardent users never imagined that a day will come when they will shun their favorite BlackBerry for smarter phones from Apple (NASDAQ: AAPL) and Google’s (NASDAQ: GOOG) Android-powered phones from Samsung, Sony, LG, HTC and many others.
Demand, the fundamental, gone horribly wrong
Be it the smartphone space or the tablet space, RIM’s performance has been ridiculously poor. In the second quarter of 2012, BlackBerry accounted for only 4.4% of the entire smartphone shipments worldwide, down from 16.9% of the year ago quarter, as it gave way to increased shipments from Apple and Android based phones. Apple and Google together have a command over 85% of the smartphone market and South Korean giant Samsung is leading the race, having shipped more than 46 million smartphones during the quarter, closely followed by 26 million from Apple.
Even in the tablet market RIM’s presence can’t be felt. Apple, the tablet king, dominates this space with a 68% market share while RIM has got less than 1.5%. Google’s Nexus 7, Amazon’s Kindle Fire, Apple’s iPad Mini and definitely the Surface range of tablet computers from Microsoft (NASDAQ: MSFT) will leave no space for RIM’s back-dated Playbooks. And on top of these, now that Samsung is ready with its Galaxy Note 10.1 tablets, RIM’s Playbooks are surely going to become the ‘Dodo birds’ of this space.
(Source: IDC)
The key to success in this highly competitive and extremely dynamic consumer electronics space is to leverage the success of one product to make the next new product successful. Apple’s iPad was an instant hit and that had to a lot with the massive success of the iPhone. Samsung’s Galaxy Tab was again a hit thanks to the Galaxy range of smartphones and beyond doubt the Android platform. Now, analysts are again expecting great things from the Note 10.1 and again the reason being the huge sales numbers of the Note smartphone (8 million units in just 7 months) and Galaxy brand. Analysts feel the consumers are ready for the next evolution in the tablets and the Note 10.1 with the ‘S Pen’ is providing exactly that. Even Microsoft is expecting the success of the Windows Phone 8 powered Nokia Lumia handsets to have a positive influence on the consumer-acceptance of the Surface and vice-versa.
RIM has witnessed itself falling from grace, lost market share as rapidly as a forest fire spreads, reported disgraceful results quarter after quarter and hasn’t even been able to live up to its own words as it keeps on delaying the BlackBerry 10 launch. Now, Zacks has a rank for RIM suggesting sell rating over the short term and several analysts are predicting only slow and painful death for RIM. Even to me it seems that RIM has reached the end of its life as a publicly traded company.
BB10 too far away to reach on time
What is the point of taking out your best weapon after the fight is over and you have already lost? This is what Thorsten Heins, RIM's CEO, needs to realize. The biggest holiday season of the year is just around the corner and each and every other player is grooming its product line. Nokia has got special arrangements with Microsoft to launch the first Windows Phone 8 devices, at least a month ahead of its rivals, Apple will start shipments of September 21, and Samsung is planning huge promotions for the Galaxy Note 10.1. But, BlackBerry is just too busy deciding a date when they will again decide whether to launch the BB10 platform or not. As of now, BB10 will be released sometime between January and March 2013 according to the management. Now, keeping in mind RIM’s reputation, it’s best to assume March will be ‘The Month.” This being so, can Mr. Heins please explain why will any sane person wait for so long to buy a handset specially when the temptation to buy an iPhone 5 or a Galaxy S III is so much stronger. Consumers will simply ignore the BlackBerry and move on happily with these more successful smartphone makers.
Concluding thoughts
To drive home my point I will say, things are unimaginably bad for RIM and if you still have an investment in this troubled company then it’s time that you hit the reverse gear. According to management, BlackBerry 10 is what will pull out the company from its days of misery. But they never seem to get the correct launch date for something which is so crucial to the company’s survival. Instead of desperately trying to launch the platform ahead of the holiday season, RIM plans on unveiling it by the first quarter of 2013. The analysts, the industry experts, the investors – none are getting the assurance that the new platform will finally see the light of day anytime soon.
The repeatedly changing launch date for the BlackBerry 10 is funny and another funny thing about RIM is the never ending series of rumours. It seems like every time the stock hits a new bottom, one news or the other starts circulating and these rumours somehow always pull up the prices, though marginally at times. However, this can’t go on always. Everyone following the stock has had enough with these rumours and this time if there is any slightest hint of further delay in the launch, the rumour mill is sure to take down RIM for good. However, even if BB10 hits the street on time this time, it will already be too late and there will hardly be any scope left for RIM to benefit from its latest. In the presence of iOS, Android and the upcoming Windows Phone 8, the chances for success of RIM’s BB10 are not very encouraging. If you ask me, it’s time that we all prayed so that the BlackBerry maker can rest in peace.
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