This Upgrade Is an Insult

BlackBerry maker Research In Motion (Nasdaq: RIMM  ) is on a roll. The stock took a 5% leap yesterday on news of an analyst upgrade, and now trades 48% above the 52-week lows it set at the end of August.

So what did Jefferies analyst Peter Misek say that would lift RIM to such heights? Well, it's probably not what you'd think. Rather than heaping praise on the BlackBerry platform, Misek explained that the QNX software the company bought from Harman International Industries (NYSE: HAR  ) earlier this year should replace BlackBerry sooner than expected.

That's a backhanded compliment if I ever heard one. RIM has poured untold millions into developing the BlackBerry platform, maybe even billions. To replace that legacy with a quick $200 million acquisition seems ludicrous. It's an outright insult to the BlackBerry development team, and a tacit admission that the source of RIM's golden eggs so far is running out of glitter.

Then again, that much has been obvious for quite some time. Apple (Nasdaq: AAPL  ) stole much of RIM's thunder when it introduced the first iPhone, and Google (Nasdaq: GOOG  ) piled on with the Android platform to deflate RIM even further. If QNX can turn that tide and persuade leading network partners Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) to provide marketing muscle for a rejuvenated platform, it doesn't really matter whether it's called BlackBerry or QNX -- or perhaps QNXBerry. All is fair in war and business.

So Misek upped his price target on RIM's stock from $55 a stub to $80, which is a pretty major upgrade on the strength of a potential software update. For what it's worth, I agree that RIM needs to turn a few new stones to find a new source of growth or else risk getting buried under a mountain of apples and androids.

Is QNX the magic bullet RIM so desperately needs? I'm not so sure. Let's hold off on the enthusiasm a bit until we've seen finished RIM products running the new software -- and heard from the horse's mouth that the baton is about to get passed. For now, it's nothing but educated conjecture.

Follow RIM's fortunes or lack thereof by adding the stock to your Foolish watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. He does own a Harman-Kardon home theater receiver, though. Google is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor pick. The Fool owns shares of 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. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (7) | Recommend This Article (4)

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  • Report this Comment On December 01, 2010, at 8:26 PM, DefunctAcct wrote:

    RIMM's inability to produce a berry-variant to compete against iOS and Android clearly indicates there is something lacking in the RIMM OS.

    RIMM's need to buy QNX in order to run it on Playbook is another indicator that RIMM OS is likely not scalable to run a tablet size device.

    Does it mean QNX is the panacea? No. It is just a software acquisition that allows RIMM to expedite delivery of a tablet device in 2011 instead of 2012 or later.

    Is QNX a "super" OS as some RIMM PR type are now touting by anonymous posts all over the web in various BLOGs? No, QNX is just a modern OS. Nothing superior or inferior about it when compared against iOS or Android; just different.

    RIMM's future depends on its product strategy. The misguided novice erroneously focuses on QNX (whiz-bang) and the pros focus on business and product strategies (e.g. Logistics). Cutting edge technology does not always win but solid execution of a properly device product strategy can increase sales, revenue and profit.

    Playbook will do well within the existing RIMM user community. It is unclear how it will do outside this population. The Playbook has no 3G capability and it requires a tethered berry for wireless access. The questions then are:

    1. Is Playbook itself compelling enough to attract a large population of non-berry users? Why and why not?

    2. For those iPhone and Android-phone users who want a Playbook and also wireless access, will they give up their phones for berries just to use the Playbook? Will that become a barrier to people buying a Playbook?

    3. Will carriers around the world supply plug-in USB Wireless devices for the Playbook? Will RIMM allow such devices?

    4. Which carrier will throw its marketing and sales muscles behind the Playbook?

    5. Is RIMM attempting to use Playbook as a "Trojan Horse" hoping it will attract people to its berries?

    6. How will Playbook compare against iPad 2 and second generation Android-based and Windows tablet devices in 2011? Playbook will ship when these other devices begin to refresh.

    7. How easy is it to port Android apps to Playbook? Will this make a difference? How will it make a difference?

    8. Is 7-inch an optimal size that will attract a large population of buyers? Or only those who prefer a midsize device between a phone and a 10-inch tablet?

    9. Will Kindle, Netflix, NFL, CNN, ESPN, MLB, and a host of other sites create applications for the Playbook when RIMM is clearly claiming "Apps is passe"? When and how soon?

    10. Is Playbook necessarily a better enterprise device than the iPad or Slate or Android-tablets?

    These are just the simplest questions to ask. Until these simplest of questions can be answered with some concrete data, all speculations are just that; speculations.

  • Report this Comment On December 01, 2010, at 9:56 PM, Henry3Dogg wrote:

    11. Will Bb phone and Qnx tablet integrate closely enough, soon enough

  • Report this Comment On December 02, 2010, at 1:53 AM, WileEConsumer wrote:

    Incredibly crazy stuff but Apple did the exact same with OSX. dumped everything from the past and took the FreeBSD/NextStep route. How did it work out for them?

  • Report this Comment On December 02, 2010, at 6:20 AM, TMFZahrim wrote:

    @WileEConsumer, mind you, Steve Jobs founded Next during his hiatus from Apple and simply brought back what he'd been working on for a few years when he got back to the big show. It's a much more radical move for RIM to adopt QNX wholesale than it ever was for Apple to use NextStep.

    @TheMainMillerMan, you say: "RIM was upgraded, so leave it at that." There's an outlet for just the basic facts: AP. I get paid for applying critical thought to the raw news feeds. You're welcome to disagree with my conclusions, logic, or premises, but you're supposed to come to the Fool for our independent analysis. It tastes great and is less filling.

    Anders

  • Report this Comment On December 02, 2010, at 8:54 AM, sk8ertor wrote:

    WOW, so many RIM bashers, including the author of this article, who are obviously the same ones who shorted the stock and are now paying dearly for it. QNX has already shown in can easily integrate with BlackBerry. Furthermore, QNX is a very secure environment, is very simple to develop for, and is scalable. RIM's co-CEO even said a few weeks ago that moving QNX to a BlackBerry handheld "is not the hardest thing to do." Remember, FOOLS, that the network/servers (NOC) that RIM has is on their end and based on RIM's experience in providing BIS to other devices (example Nokia used BIS for a while) they can have QNX talking to their NOC in no time. Sorry to say but all the planets are lining up perfectly for RIM and with this morning's aquisition of "tat," you're going to see a whole new BlackBerry in the near future.

  • Report this Comment On December 02, 2010, at 8:56 AM, sk8ertor wrote:

    Anders Bylund should stick to writing FOOLISH articles and leave the analyst ratings for the professionals.

  • Report this Comment On December 02, 2010, at 10:41 AM, ksoroch wrote:

    Wow an analyst who knows nothing at all about RIMM or mobile OS. As many have already written RIMM is much more than an OS. They have not concentrated on the OS and have paid for it. They now bought a great OS and are integrating it to catch up. With the combination of great backend and great frontend they should have a winner. However as this article shows, so-called experts rank things based the surface without actually understanding what is going on.

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