What This Third OS Will Bring

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

No doubt, RIM (NASDAQ: BBRY) has taken longer to come up with an operating system that it could use to lure the consumers and save the company from selloff. But when the OS duopoly is launching a flurry of new versions in short durations, the question that comes to mind is, is the market ready to accept BB10? When the success of iOS and Android gives much less space for creating a product with a unique differentiation, is there a possibility that RIM can come out with a trailblazing product?

Despite delaying its launch of BB 10 earlier two times, RIM’s subscriber base hasn’t fallen down. In contrast it actually increased to ~80 million from 78 million in last quarter. And it gives me a feeling that there is still a huge customer base anticipating BB10 will offer something unique over the existing OS in the market.

BlackBerry 10 launch

The launch of its BB 10 is scheduled for Jan. 30, 2013, and the shipments for these devices are expected to begin within 2-3 weeks of the launch. RIM’s BB 10 is featured with the new graphical UI and the new navigation system for apps, a BlackBerry Hub for communication, a revamped BlackBerry App World for music and videos in competition with Google Play and iTunes, a new camera application featuring a “Time Shift” and “BlackBerry Balance.” Not to forget RIM’s unique tight security and control feature, which is a benefit for the user over Android because it's seldom hit by spyware and malware.

With users now looking for faster speeds and glossy devices with lots of app bundles, RIM has prepared itself accordingly. Also, in a latest release RIM updated its BlackBerry developer program under which developers who are currently testing for BlackBerry Dev Alpha test can join for app testing for BlackBerry Dev Alpha C test device. Developers can later on swap the Dev Alpha devices with BB 10 limited edition. The purpose is to drive a pre-launch market and catch the developer community’s attention for the BB 10 and to increase licensing opportunities.

How investors are weighing this launch

RIM’s stock finally saw a hope of light and rallied in the market advancing by 17% after National Bank Financial analyst Kris Thompson enhanced the target for the stock to $15. This stock also received a positive vote from the CIBC, which also raised the target to $17. A similar upgrading for RIM’s stock was also given by Byron Capital by raising their target for this stock to $14. These target upgrades and the confirmed launch of BB10 by the company boosted the shares of Research In Motion up by an impressive ~40% in the past month.

RIM has also recently gained attention from many hedge funds as revealed in their 13F filings for the last quarter. The highest investment is from Fairfax Financial Holdings, owned by Prem Watsa, also known as the Warren Buffett of Canada for his highly successful investment strategies. Prem has increased his holdings up to 19.79% uplifting as much as 93% from the last quarter, bringing his total investment to $390,160; this has been recorded as the largest activity in his fund portfolio. Apart from this, there are many other well-known fund managers who have taken new positions in the stock such as Kleinheinz Capital Partners, Tudor Investment Corp., Tyrus Capital, and Zweig Dimenna Partners.

Taking the blows from the giants
Considering RIM’s current position vis-a-vis its competitors, Apple has been giving RIM strong punches regularly.  RIM recently lost a contract with the U.S. Defense Department to Apple (NASDAQ: AAPL). The department ended the contract due to the unreliability of RIM’s products and opted for the more dependable Apple iPhones for the U.S. military.

Adding to this setback for RIM, the launch of iPhone 5 eliminated RIM’s chances of winning back this contract.  RIM also faces stiff competition with the Apple iPad for its Playbook. Within three years of the launch of its first iPad, Apple has announced the launching of its fourth generation in October. Although, BlackBerry Playbooks come with an economic cost factor when compared with the iPad, they have smaller screens and lack the advantages of Apple’s rich App store.

Continuing its slide, RIM has lost market share not only to the iPhone but also to Google’s (NASDAQ: GOOG) Android-powered smartphones, which have captured 70% of the market share up until the last quarter. Samsung tops this segment of the market. No other company has been able to match the handset maker’s sales with 60 million units with all credit going to its Galaxy S III and Galaxy Note II. Google’s Android gives the handset makers the advantage to customize different versions of the OS.

What is RIM’s shield?

Data compression technology

RIM has a competitive advantage over its peers with its unique data compression technology, which enables the user to surf faster on the internet. BlackBerry's cost and time efficient data compression technology enhances the user experience. Also, its Push technology for emails is loved by the enterprise users who can receive faster emails using this technology.

CORE Program (Cost Saving)

RIM has set a target to save $1 billion by the end of the fiscal year and it has already achieved savings of~$350 million. Further another ~$800 million savings is expected in the second half of the year. The targeted savings are to be achieved through different marketing processes, simplification of organizational structures, freight, manufacturing and repair services, headcount reduction, etc.

On the whole, the introduction of an improved new model of the BlackBerry was acutely needed as RIM’s BlackBerry has been under continuous pressure since 2008 after the launch of iPhone and Android devices. With this latest version BlackBerry should give a fight to its rivals, which are dominating the market. I anticipate incremental sales as well as gain on lost market share ahead for this stock and a good entry point for investors at this time.

 


ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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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