The Sky isn't Falling on RIMM
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The sky really isn’t falling at RIMM.
After their much talked about developer conference in Orlando where Research in Motion (NASDAQ: BBRY) released a prototype of their new BB10 phone, RIMM has been beaten down in the market. The conference was seen as a pivotal point in the future of the company and many felt they needed to show some game changing technology to avoid being relegated to the tech graveyard that has claimed the likes of other once dominant companies like Polaroid. Following the conference the media has been singing a very familiar tune of “to little too late” and the fact that the BB10 doesn’t seem to have any game changing capabilities unavailable in the competing iPhones and Android based smart phones.
The market is treating RIMM like Galileo was treated by the Roman Inquisition. When he said that the universe didn’t revolve around the Earth he was forced to recant and spent the rest of his days under house arrest. It seems to me the media believes that the market revolves around Apple and to oppose that concept is heresy. The concept that RIMM must dominate in the North American market, specifically the United States and Canada, or the company is worthless is so far from reality it makes the Roman Inquisition look like rationale scientific discourse. RIMM has been sent to media purgatory where it remains getting poked by little red men with pitch forks regardless of what it does.
I will be completely honest and may I be struck down by some iThunder if I am lying, but I prefer the Blackberry to the iPhone. I don’t enjoy the lack of a QWERTY key pad and the fact the iPhones auto correct makes me sound like I have a lisp when I text. A “me too” offering by Blackberry would be music to my ears as I would surely pick up the new device. I am not alone either as I have met people who feel the same way and have actually switched back to their once beloved Blackberry. Understanding that we are not the majority, I am not trying to convince anyone that Apple (NASDAQ: AAPL) doesn’t make good products. In fact I am a big Apple fan and have several other Apple products including an iPad. I also am very bullish on Apple shares in the short term and see the company hitting 1000$ in the near future. What I’m saying is that as RIMM generates a good portion of their revenue from Smartphone sales, I don’t see this business as dead or even dying. They are growing their market share in parts of the world much more populated than the United States. Their ability to offer data compression over their proprietary networks and therefore much cheaper data plans in countries where the networks are much slower than North America is driving their business. In countries where the switch from 2G to 3G is underway the speed of the iPhone and Android devices is severely limited.
Imagine that in some major markets RIMM actually outsells Apple when it comes to smartphones. Take a second and put your iLaser down and actually look at some numbers before you zap me. RIMM sold just over 5 times as many Blackberries as Apple sold iPhones in Latin America. They sold over 3 times as many phones as Apple in the Middle East and it is estimated they have a 50% market share in Indonesia. A 15% market share in India lands RIMM in third place in a market almost the size of Canada, the United States and the E.U. combined. The company earned 1.1 billion dollars in 2011 and has no debt; they are releasing an updated version of their Smartphone and still have the most secure proprietary network in the world. RIMM has most definetly made some costly mistakes in the last couple years and has hurt their brand immensely in certain markets, but they have been able to grow in many others.
I truly believe that RIMM will have a turnaround and are in the process of not only improving their product offerings but are still growing their business in markets throughout the world. The Canadian and American media have been on a hunt for RIMM shooting down everything and anything they have done in the last 24 months. It has sent RIMM`s shares tumbling to the point where its P/E of just over 5. They have shaken up their management team, are releasing a whole new line of devices over the next couple months and will ride this storm out.
mooseelz owns shares of Apple and RIMM. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. 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. If you have questions about this post or the Fool’s blog network, click here for information.