Rebound or Requiem? Is Research in Motion Strong Enough to Survive?
Matthew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Fellow Foolish Blogger Robert Zimmerman kicked off this deep dive analysis of Research in Motion (NASDAQ: BBRY) with an introduction to our SWOT analysis of this once great company. Together we’ll be answering the burning question that investors want to know. Will Research in Motion rise again to greatness or is it time to bury the company once and for all.
RIM truly has been one of the great technology companies of the past decade. Unfortunately, investing is all about what have you done for me lately or more importantly, what are you going to do for me next. That questionable present and blurry future has sent the company’s stock down 90 percent from its all-time high in 2008. Still, it’s a company that’s delivered nearly 4,500 percent of shareholder returns since going public.
Many of the strengths that drove the company to such heights are still evident. If the company is going to rebound, it’ll need to build upon these strengths in order to rise again.
A reputation for building a solid device with superior security.
Despite losing ground to rivals over the past few years, RIM’s BlackBerry devices are among the most secure. The new BlackBerry 10 which will launch early next year has been granted the Federal Information Processing Standard 140-2 security certification. This is required for devices using secure government settings where classified materials are transferred via mobile devices. Security will continue to be a critical issue in an increasingly mobile world. No one matches RIM in this department.
Early reviews of the BB 10 are promising that the new device will put the company back on the map. The key will be for the company to quickly convert its entrenched customer base and then grow from that base as word spreads that the company has truly delivered.
A loyal customer base.
While Apple’s (NASDAQ: AAPL) iPhone and Google’s (NASDAQ: GOOG) Android powered devices are garnering a larger part of the smartphone market, there is a reason RIM’s devices were known as CrackBerry’s. The stories of those addicted can be quite comical, but shouldn’t be overlooked. Arianna Huffington for example carries four BlackBerrys. However, the reason for the addiction is quite clear; it’s the best way to balance productivity with pain. In a recent interview she stated, “Come on guys, you have to admit: typing on the iPhone is painful.” For those needing to get things done, the BlackBerry has always been the device of choice.
It’s not just the on-the-go professional that’s hooked. Governments have always been loyal RIM customers. Just the other day it was announced that the U.S. Immigration and Customs Enforcement (ICE), a division of the Department of Homeland Security, would be a test pilot program using the company’s new Blackberry 10 smartphone. In the release, RIM stated that ICE would be one of the first government organizations to pilot this phone. The company further stated that “ICE has been a valued BlackBerry customer for years.” RIM needs both government and corporate customers to embrace the BB10 en masse.
A marketing strategy targeting BB10 to a specific customer segment rather than being all things to all people.
RIM has decided that its best bet is to focus where it’s strengths lie, which is the enterprise market. CEO Thorsten Heins has finally come to grips that, “BlackBerry cannot succeed if we tried to be everybody’s darling and all things to all people.” While some would disagree, I think this is the best course of action for the company to rebuild its brand image.
Specifically, the company needs to focus on its government and corporate customers where the company can leverage its security features as a competitive advantage. It might not be flashy but by building around security the company can build a solidly profitable business which can grow as mobile security becomes a bigger issue over time.
Lots of cash and no debt
While nowhere near the balance sheet of Apple, RIM does have a solid balance sheet and no debt. This takes some of the pressure off of the company by giving it flexibility to invest instead of just trying to survive.
Foolish Bottom Line
For RIM to succeed the company can’t try to be all things to all customers. Blackberries simply are not the status symbol they once where and the company lost its coolness factor a long time ago. RIM’s strength lies in its security which is critical to both governments and corporate clients. If the company can leverage these strengths it has a chance to rebound. The company likely will never be the juggernaut of yesteryear, but it can become profitable by focusing on growing from its strength.
latimerburned owns shares of Apple and has the following options: Apple. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!