"Research in Motion" is Canadian for "Eastman Kodak"
Jonathan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Like Eastman Kodak, Research in Motion (NASDAQ: BBRY) is following a predictable path that ended up in bankruptcy for a high tech firm that at one time was the sector leader.
Research-in-Motion, headquartered in the city of Waterloo in Canada, introduced the smartphone to the world. Eastman Kodak, based in Rochester in Upstate New York, invented the digital camera. Both made mistakes along the way that ceded primacy to rivals such as Canon (NYSE: CAJ), Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL). Canon conquered the consumer marketplace for cameras, as have Apple, Microsoft and Samsung for smartphones.
Before Eastman Kodak filed for Chapter 11 bankruptcy, it was overly optimistic that its high-end printers would revitalize the company. It is much the same for Research-in-Motion now with its hopes for the Blackberry 10, reported to be coming out in January with a focus on the business community. Eastman Kodak was also counting on its patent portfolio to entice a buyer to save it from going under in the latter stages. At present, Research-in-Motion is in much the same position with its patent holdings.
As with Research in Motion, Eastman Kodak has very valuable patents. It was expected that these would lure a buyer as the patent value was purported to be many times the market capitalization of Eastman Kodak. Predicted Keith Wirtz, Chief Investment Officer of Fifth Third Avenue Asset Management about Eastman Kodak in its end games stages, "They do have values embedded in patents and other technologies. Someone is going to buy the company and tear it apart."
Did not happen.
And it has not taken place for Research-in-Motion and most likely will not transpire. Research-in-Motion has been trying to sell itself for well over a year. Supposedly, Samsung was very interested but pulled back. According to analysts with the investment bank Jeffries, Samsung is very interested in a licensing deal with the Blackberry 10.
But the early reports about the Blackberry 10 are not promising. From one: "Research In Motion is counting on its delayed BlackBerry 10 platform to reinvigorate its brand, increase smartphone sales and, in short, save the once-industry-leading company. Analysts with investment firm Jefferies, however, are now saying they don't expect BlackBerry 10 will live up to RIM's expectations. After trying out RIM's Dev Alpha—a mock smartphone RIM provided to developers so that they can try out the in-progress new platform—they believe the OS is unlikely to make a dent in Apple's iOS standings, especially as the company prepares the new iOS 6."
Making it even more daunting for Research in Motion is that, very soon, Apple will be introducing the iPhone 5. On August 29, Samsung has announced it will be unvieling the new Galaxy Note. Microsoft has big plans for its new Windows smartphone. Amazon (NASDAQ: AMZN) is reported to be unveiling a Kindle smartphone soon, too.
This is the same way that Canon introduced a vast array of digital cameras that destroyed the film segment of the marketplace. Canon also challenged Eastman Kodak in the business equipment sector, too. It does not appear as if the Blackberry 10 will rescue Research in Motion any more than the high printers did for Eastman Kodak. At present, on the list of the ten best selling smartphones by Amazon, the Blackberry is not represented.
Just like Eastman Kodak has slid, Research in Motion has regressed to a much weaker position in the market that makes it almost impossible to recover. According to one article, "RIM, meanwhile, has seen its market share plummet. According to Aug. 5 data from Canaccord Genuity, Apple sold 26 million phones during the second quarter, for a market share of 16.1 percent, down from its 2011 market share of 18.8 percent. The dip was attributed to not disinterest but strong anticipation of its next iPhone model. Samsung, meanwhile, shipped 50.5 million phones, bringing its market share up to 31.1 percent during the quarter, compared with its 2011 total of 19.3 percent and 2010 total of 8.3 percent. RIM shipped 7.8 million phones during the quarter, more than halving its market share to 4.8 percent during the quarter, compared with 10.7 percent for the whole of 2011."
High hopes are not enough in the high tech sector, as Eastman Kodak proved. Over the last 52 weeks of market action, Research in Motion has fallen by 64.71%. It has a negative profit margin. On a quarterly basis, sales growth is off by 42.67%. Over the same period, earnings-per-share growth is down by 174.58%. What is rising for Research in Motion is the short float, now at 20.91%. A short float of 5% is considered to be troubling for a company, as the shareholders of Eastman Kodak found out at great cost.
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