For Research in Motion, it's only a Matter of Time

By Harsh Chauhan - July 2, 2012 | Tickers: AMZN, AAPL, BBRY, GOOG, MSFT | 0 Comments

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Research in Motion (NASDAQ: BBRY) has snapped its only lifeline. The BlackBerry 10 phones, which were supposed to be the messiah for the once-mighty smartphone maker, have been pushed back further (yet again). Its management is living in delusion and analysts are looking at various ways through which even a drop of value can be eked out from this obsolete giant.

A “masterful” management

Selling off the company’s portfolio of patents is the only alternative left for it, and rightly so, since the company can just do no other good for those who still keep faith in it. This will be one plausible way in which it can do something good. But RIM’s stubbornness won’t let investors have even that luxury. Management believes that RIM can still stage a turnaround. And I say that they have a great sense of humor.

Going through RIM’s conference call is like reading a satire. Take this for example – “I want to assure you that we're not standing still and that we are continuing to accelerate our focus on our key initiatives.” Accelerate focus? Sustained delay in launching the device that you said might save you from oblivion is anything but acceleration. Moreover, it shows us the grossly unplanned way in which the company is being managed. Apple (NASDAQ: AAPL), for instance, has a systemized timeline of launching products and consumers know that they would get a new version of an older device from Cupertino for sure. But RIM isn’t Apple, and it can never be.

In RIM’s case, this delay will turn out to be lethal. It has pushed back the device launch to the first quarter of next year. The BB10 devices have been in the works since ages, and in case they do see the light of the day, they might not find many takers. Apple’s next version of the iPhone, slated for a launch a few months from now, would certainly eat into probable buyers of RIM’s phones (I don’t know if that breed still exists).

Mayday – We are going down

Many believe that RIM is on the road of bankruptcy, and quite rightly. With sales plummeting at a supersonic pace and better devices on their way, RIM’s top line doesn’t have much upside potential. Its stream of cash flows is drying up and the company’s sustainability is a serious issue. Look at how its operating cash flows are disappearing.

In the most recent quarter, RIM’s cash flow came in at $711 million, 30% down from last year. And the company is taking the most convenient route of shoring up this decline – layoffs. RIM is going to downsize its workforce by 5,000 to reduce costs, which again brings to life the debate - who really deserves to be laid off.

On this point, Mr. CEO delivers another mindboggling line – “In order to align our cost structure to help us move effectively through our transition and deliver on long-term stakeholder value, it is necessary to change the scale and refocus the company on the areas of highest opportunities.” Boy! You really need to get up and see that your opportunity has passed. No stone has been left unturned in destroying shareholder value, and your stock lost 20% because of your tomfoolery.  

RIM - For those who don’t do…

RIM has done nothing at all to reverse its fortunes. For a year now, the company has been harping about BB10, but where is BB10? An eternity has passed since the BB10 was announced. Since then, we have seen iPhones, Samsung Galaxies, HTCs and even Microsoft (NASDAQ: MSFT) jump into the fray with its Windows Phones. Microsoft’s OS might not have taken the world by storm, but it is a pretty refined system and I have never seen my phone hang up in two months of use. In the same breath, my BlackBerry needed a battery pull twice a day at least. So kudos to Microsoft for delivering a nice system and they can indeed build over it. But sadly, RIM didn’t learn anything from Mr. Softy, who entered the game late and is more organized than this veteran.

…and if they do, they do it wrong

RIM even failed to make a good tablet and its PlayBook is almost a forgotten entity now. Surprisingly, a retailer like Amazon (NASDAQ: AMZN) managed to beat a hardware company like RIM at its own game. The Kindle Fire by Amazon turned out to be a hugely successful product and was second on the podium behind the iPad for a decent amount of time. But, as always, management still hasn’t learned anything and is preparing the LTE PlayBooks for launch.

Mr. Heins, look around. Google (NASDAQ: GOOG) just launched a tablet at a killer price point and it opened to positive reviews. The Nexus 7 by Google, at just a couple hundred bucks, is way better than the tablet that RIM had produced and charged a premium initially. And when it failed, RIM gave it away at a throwaway price to clear up inventories, and took a hit on margins. And since it's RIM, they would never learn and are ready to punish themselves once again.

The bottom line

Analysts at Nomura Equity Research model that RIM will be a defunct entity by 2020. But with a management that has been awarded the “CEO Gaffe of the Week” by Fool analyst Sean Williams a couple of times this year, it would be the least surprising if RIM disappears before that. 

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