RIMM is the Bullied Kid in the Tech Playground
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Poor Research in Motion (NASDAQ: BBRY)! It seems every time recess comes around they are shaken down for their lunch money and hung by their underwear on the monkey bars. It has become popular to preach about the upcoming demise of RIM, their blackberry phones, and the entire company. Report after report, analyst after analyst are downgrading the shares and expounding on how the company is finished. It will be the next Nortel Networks, a once powerful Canadian telecom company that went bust in the early 2000's. The blackberry device is obsolete, their network had a blackout earlier in the year and their management team is stuck in the past. These seem to be the arguments of the general market and are reflective in the stocks 80% drop in price in the past year.
What can RIM do to stop the bullying? Should they sell themselves to the highest bidder as many market watchers have recommended? If you look at the beatings the company is taking in the media and the financial press, you see a company in turmoil having lost massive market share in North America to the innovative iPhone and the Android based smart phones.
Looking beyond the obvious, you see a much brighter picture. First of all the company has no debt and is still profitable overall. RIM has recurring revenue streams. According to a recent tweet by the company, it has 55 million BBM (Blackberry Messanger) users and has arguably the most secure network in the world to send data over. A recent report has surfaced that before Jim Balsillie resigned he was negotiating with major wireless companies in North America and Europe to rent out their network for use with other makes of smart phones. Though it seemed to be opposed by the rest of the executives in the company, it shows that RIM truly does have some options for a turnaround.
They have been put in a lose-lose situation with their Blackberry 10 phones as the delays have caused people to begin to doubt the functionality of the devices and if they will be able to recapture the lost market share. The same people were raking RIM over the coals for the Playbook that was released without several glaring functionalities like dedicated email and BBM. If you look at the release of the BB 10, even if they are not as groundbreaking as most analysts are saying they need to be to avoid the collapse of RIM, they really just need to be good not great. We forget that the North American market and the Euro zone market are no longer the fastest growing or largest smart phone markets in the world. RIM has lost significant market share in these markets, but has continued to gain in other markets outside these zones. For example, the population of the Middle East and North Africa is over 380 million people greater then the population of North America. This market has been continuing to adopt the blackberry and enjoy the free and instant messaging services they provide. Blackberry also provides services in some countries that most North Americans don’t know about. In Brazil, for example one can use the blackberry as a walkie talky for free to talk to others on the network with a Blackberry. The population of India alone, which has continued to grow its adoption of smart phones, is almost equal to that of Europe and North America put together.
RIM has growing markets to take advantage of in countries around the world where their ability to provide cheaper data plans and free instant messaging can be a major selling point. Going back to what they were built on with the release of their mobile fusion platform they also open the door to continue to grow their enterprise software business. Potentially offering companies the ability to utilize their secure network and allow the companies employees to use other smart phones. Looking at an unbiased picture of RIM, it doesn't look like Apple did - on the cusp of their great turnaround, but one that can go in both directions. It is highly probable that the BB 10 phones will not blow the iPhone out of the water or contain groundbreaking technology, but RIM is much further away from being obsolete then we are led to believe. They have cash to spend, no debt, new products about to launch and a proprietary network that in the near future can’t be duplicated. I see RIM kicking the bullies in the shins and regaining some respect in the market in the near future, they might not rise to dominate the market, but they will rise from these premature ashes.
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