Blackberry: Optimism Is In the Air
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Research in Motion (NASDAQ: BBRY), the developer of the Blackberry smartphones and tablets, has been brutally criticized for its lack of innovation and its inability to launch a new device. Blackberry phones were considered best in class only a few years ago. The corporate aces boasted about their Blackberries and tried to show off their mobile everywhere they went. They were even called the Blackberry boys. But then there was a revolution in the mobile phone market.
Apple (NASDAQ: AAPL) changed the way a phone was perceived. The cell phone was no longer used just to make phone calls or to read emails. An iPhone could do most of the things a handheld computer could do. It was the iPhone that made a smartphone really smart. An iPhone combined a cell phone with very good call quality, an iPod with some lovely new interface options, a well-integrated PDA, a GPS device with voice navigation facility, and an Internet interface that offered web browsing, email, and web application support. Since the release of iPhone in 2007, Apple’s share price increased from $190 to $700 before coming down to $590.
If we compare the share price of Research in Motion during the same time period, this is what we observe
The share price of RIM fell from around $144 in June 2008 to about $12 in November 2012. This happened because RIM was unable to develop competitive products for the mobile market during this period. The buyers slowly lost interest in the Blackberry phones and started buying products from RIM's competitors.
Apple is not the only company that gobbled up Blackberry's market share. Another company responsible for this was Google (NASDAQ: GOOG). Google’s mobile operating system Android is yet another favorite among the smartphone users. Many OEMS like Samsung, LG, HTC, etc. develop smartphones that run on Android. Android devices include tablets, smartphones, cameras, etc. The sale of Android devices is much higher than any other smartphone developers.
If we look at the share price of Google from the year 2007 onwards, we will see that Google’s share price came plunging down from around $700 to nearly $260 in October 2008. However the first commercial Android phone, the HTC Dream, was released on October 22, 2008. Since then we can see that the share price of Google has increased gradually to around $700 at least in part from this strategy.
We can see that currently RIM is in a pretty bad state. But recent news about the upcoming release of two new Blackberry devices, with the new Blackberry 10 Operating system, in January 2013 has ignited some hopes in the hearts of investors, since Wall Street is increasingly optimistic about the Blackberry 10 operating system.
On Thursday, Goldman Sachs upgraded RIM to "Buy" from "Neutral." The firm currently has a $16.00 target price on the stock, up from their previous target price of $9.00. We saw an increase in the share price of RIM from $10.99 to $12.26 owing to the good news.
According to Simona Jankowski, a Goldman analyst, the current products from Blackberry continues to lose market share to iPhone and Android devices. But that will change with the release of the new Blackberry 10 devices.
“We now assess a 30 percent chance of success for BB10 given positive early reviews, broad-based carrier support, attractive features, and interest by carriers and consumers in broadening the field beyond Android/iOS,” she wrote in a research report today.
The analysts from Goldman Sachs are not the only ones laying their bet on RIM. There are many others like the analyst at CIBC, Morgan Stanley and Macquarie who have their own opinions on the stock price of Blackberry.
If the new Blackberry 10 devices are good enough to impress the buyers, we may see Blackberry’s good old days returning. If not, it is highly possible that there may be no comeback for RIM and Blackberry. Let us wait and see what happens after the Blackberry 10 release.
shinerulz has no positions in the stocks mentioned above. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!