Analyzing RIMM's Potential Resurgence

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

I had a feeling that Research in Motion (NASDAQ: BBRY) was still trudging along, though a small part of me expected it to be looking for bankruptcy at a certain point. I never really took a look at the company' the iPhone was out before I was looking at companies as investments and not just as the makers of stuff I wanted. Apple's famous iPhone is probably still a big impediment to RIMM's ability to turn itself around. If you add Google's (NASDAQ: GOOG) Android-based phones and the far less threatening Nokia (NYSE: NOK) phones, then it becomes a monumental task.

RIMM's Steep Challenge

There are some formidable companies in RIMM's way, so do not bet too heavily on a turnaround. The first thing that suggests to me that I should play it carefully is that I have no plans to get a RIMM phone. There is still some demand out there though, and if the company can produce something innovative it has a chance. Of course, quality will eventually be noticed, but it is hard to stay in business when you are posting major losses. Therefore, I do not think any new products will really make the difference for RIMM right away, barring something miraculous.

Strategic Misstep?

RIMM has almost $3 billion in cash, and no debt. That gives it an opportunity to innovate its way back into the market, though I am not sure the choice of strategy is right. I have been reading a lot about the new OS called BlackBerry 10, but I am not sure a new OS is the way to go. Apple's OS is for one line of phones and tablets. Google's Android OS is all over the place on different models with licensing available for new phones. Microsoft has an OS bouncing around on the Lumia. The Lumia is doing an okay job of grabbing the dispossessed from Apple and Android, and I am not sure there is more room for another rebellious, outsider choice for operating systems. The fourth choice after iOS and Android is BlackBerry 10. That could very well be the future, and that would be bad for Nokia, which is rapidly losing money. Worse for both companies is splitting the fourth position, and having neither company make enough to survive.

I know that back in the day the BlackBerry OS was a big deal, but for a company posting severe losses it seems better to sell phones. It is not like the company charges extra to be fitted with the BlackBerry system, though it will probably license the new OS out. Perhaps I am just a quitter, but is there a need for another OS? I feel like adopting Android might be the better choice, or maybe even Windows Phone. Google does not make money licensing the Android OS out, but it helps drive searches and bring in money through app sales. Considering the growth of the Android OS over the last few years, this will amount to a substantial revenue stream for Google. The first Android phone was sold in 2008, so its rise as a dominant operating system is amazing. Considering Google's licensing of the Android OS, I do not think RIMM will get very far licensing out its OS. Nokia went with Microsoft for the strength of the partnership, but RIMM does not have the strength to draw in partners.

I know BlackBerry likes to have some strong security in its phones to appeal to the government and enterprise market, but I just do not see this as a good move. Unless the operating system really offers something unique and amazing it is a drag on the company to develop and support it. I know RIMM is trying to develop its own app store, which could bring in revenue opportunities, but I don't know if it will be enough to justify developing an OS. With the company in the shape it is in now, I do not know why it wants to go head to head on hardware with the likes of Apple and Samsung, and head to head on software with the likes of Google.

Final Thoughts

A new phone might be promising, and it might usher RIMM into the current age of mobile phones. However, reviving the brand will be hard. Also, convincing most investors that the stock is worth investing in will take time. There has only been leaked information regarding the new phone, as far as I can find. Success would be welcome, because RIMM probably has more room to grow than Apple does, even with the latter's big decline. I like Android's potential to deliver revenue growth to Google and helping the stock improve, but I generally like lower-priced stocks. Despite that, I would not want Nokia right now, nor would I take RIMM on the possibility of a turnaround until I see something substantial.


TheArchivist has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. 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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