Why Apple Does Not Belong on RIM’s Radar

Richard is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Beleaguered tech giant Research in Motion (NASDAQ: BBRY) is arguably one of the biggest “boom to bust” stories the market has ever seen. In the blink of an eye, the company's stock went from $5 to $140. But just as quickly, RIM has seen its market cap plummet back to earth where shares recently reached a low of $6. RIM was once cool. Then all of a sudden it was embarrassing to admit that you owned a Blackberry.

RIM's remarkable tale from riches to rags was due to its corporate loyalty. The company just culd not escape the grasp of its its bread-and-butter enterprise customers. However, things were suddenly changing – except RIM had no clue what it was. But Apple (NASDAQ: AAPL) did. Apple realized that the consumer side of the mobile devices market was being ignored in favor of strict corporate policies. Thus, the iPhone was born.

Will BB10 live up to its billing?

As BlackBerries were successful in the way they tethered employees to their jobs with email, Apple's iPhone, which featured apps, music, photos and text capabilities allowed consumers to bring their personalities with them to work. It was brilliant! Google (NASDAQ: GOOG) then followed with Android and Microsoft (NASDAQ: MSFT) realized that it needed to step up its game. Microsoft quickly started working on its new phone OS and then partnered with Nokia. Unfortunately for the latter two, their strategy has failed. 

Meanwhile, by the time RIM realized that enterprises were no longer in control and BYOD had taken over, it was too late. RIM was left for dead.  The company grossly underestimated the will of the consumer. But now it has new life - or so it seems. It all hinges on the success of BB10. Yes, this is the same operating system that on two prior occasions RIM has delayed. RIM investors hope that this will be what propels the company back to prominence. To that, I say hold your horses.  But on the other hand, to investors that think BB10 will bring RIM revenge against Apple: It's not coming.

However, this does not mean that Apple will always dominate the market. After all, the only guarantee on Wall Street is that market leaders don’t remain leaders forever. I just don’t think BB10 is the slingshot to Goliath that RIM investors think it is. Still, BB10 will certainly help the company acquire some market share. But it won’t be from Apple, especially after Apple just topped Google in U.S. sales.

Let’s not get too emotional, focus on the trade

RIM investors should hope that BB10 can first steal some share from Microsoft’s Windows phone and then work its way up to more realistic goals. I do see an opportunity for RIM to gain some traction with consumers. In the meantime, there will be plenty of opportunities for investors to make money as evident by the 60% run the stock has already seen over the past several weeks. 

The stock has essentially doubled after reaching its bottom at $6.22. Smart investors want to know how much farther it can go. Evidence suggests that RIM might be able to reach $15 to $20 in the near term. This is even if the success of BB10 is considered only marginal. For example, Peter Misek, an analyst at Jefferies & Co. presented a scenario where shares of RIM can reach $43. This is even though Misek gives BB10 a 20% chance of success.

In other words, there’s money to be made in RIM from current levels - at least 260% more according to Misek. But investors that get caught wanting to be right or hanging on to BB10 with so-called “conviction” are going to hurt themselves by missing out on a good trade opportunity. However, over the long term, RIM’s success will rest on its ability to produce top-line growth and whether or not the company can return to making products that consumers want to buy.

Bottom line

RIM has come a long way, but I worry that investors do not truly appreciate the obstacles that the company must still deal with. As RIM works its way back towards respectability, smart investors who are not emotionally attached should want to see two or three consecutive quarters of solid revenue growth before considering RIM as anything more than a short term trade. In the meantime, I am curious to see if RIM can successfully execute the launch of BB10; that in of itself will be a small victory. RIM investors can then worry about Apple later. 


rsaintvilus is long AAPL and holds no positions in the other stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. 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!

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