Will Research In Motion's Nightmares Ever End?

By Harsh Chauhan | More Articles
September 21, 2011 | Comments (2)

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Last month, I bought a BlackBerry phone but sold it within four weeks for an Android device. Apparently, I'm not the only one running away from Research In Motion (Nasdaq: RIMM ) : When the company released its quarterly earnings, shares plummeted by almost 20% after-hours.

Let's see how many negatives lie in store for RIM.

The numbers
RIM's revenue for the quarter dropped 10% from a year ago and 15% on a sequential quarter basis. Eroding market share and dropping sales are complicating things for RIM. RIM's earnings fell by a whopping 59% as the company grappled with lower shipments and stiff competition from rivals including Google (Nasdaq: GOOG ) and Apple (Nasdaq: AAPL ) .

Another worrying factor is the declining cash from operations, which now stands in the red for the first time since March 2006. The company had already trimmed its outlook for the quarter.

Very few takers?
RIM's figures suggest there is a glut of smartphones stuck in the warehouse, as inventory more than doubled from the year-ago period on the back of low shipments and delayed product launches. This further underscores that the company has failed to meet the changing needs of consumers as its phones struggle with shrinking popularity when compared to other devices.

The rocky road ahead
RIM has tried its hand at various measures in order to arrest the decline, but none have proven effective. It launched the BlackBerry PlayBook tablet amid huge fanfare. But, as on previous occasions, Apple stole the show -- this time with its iPad. RIM's hope that the roll-out of phones based on a new operating system would help revenues failed to show the desired results. RIM shipped fewer BlackBerrys than a year ago while its PlayBook venture ran out of steam, with the company shipping only about 200,000 units, compared with 500,000 in the previous quarter.

An important point to note here is that PlayBooks run software made by QNX, which RIM acquired from Harman International (NYSE: HAR ) . The company expects this software to compete against iOS and Android but dwindling sales of the PlayBook indicate otherwise.

The Foolish bottom line
Nothing seems to be going right for RIM. Investors are pressing co-CEOs Jim Balsillie and Mike Lazaridis for a change in leadership because it's becoming a commonly held belief that these two just won't be able to pull RIM out of mediocrity. The stock has shed almost half its value this year and looks like its journey downhill is set to continue. With so many negatives in sight, it seems like shareholders could be in store for even more nightmares.

To stay on top of the latest developments at RIM, add it to My Watchlist.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

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Fool contributor Harsh Chauhan doesn't own shares in any of the companies mentioned above. The Motley Fool owns shares of Research In Motion, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Google and Apple, as well as creating a bull call spread position in 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.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On September 21, 2011, at 7:05 PM, jopow wrote:

RIM has few options, but, they need to figure out ways to prevent defections of its North American customers, consumers and businesses. Next, they have to step up advertising and promotions overseas, especially in the battle ground countries that can make a difference. Today, they released the Torch touchscreen BB 7 in India, and they are getting their various new BB 7 phones out to Indonesia, Latin America, S/E Asia, UK and Australia, where they have some strength left.
But, what is so mysterious, is how they allowed QNX to be such a long haul to market. I imagine it is all about how much manpower and capital can you spend to do multiple things all at once. Shareholders would scream if too many pots on the stove.
If RIM gets into the $15-17 range, that looks like a good buy point and wait for QNX results for its future.
Report this Comment On September 22, 2011, at 1:37 PM, melegross wrote:

Sales in third world countries won't make up for losses elsewhere. It's one reason why their margins have dropped so much, a fact not mentioned directly in the article.
Another major problem for them is the upcoming iMessage service that Apple will be introducing in the next couple of weeks. This duplicates, at least, what RIM has, and one up's it as there are now many more iPhones out there than BB's. This will take sales away from RIM in a big way.
The reason why it's taking so long with QNX is because that's how long it takes to adapt an OS. It took years for Apple to get Next's OS out to market. It no doubt took at least a couple of years, if not more, to adapt OS X to phones. Same thing for Microsoft.
The fault here is not how long it's taking, but that they waited so long to understand the need in the first place. If they began this in late 2008, or even in mid 2009, they would have been using it for a year now on their phones, and maybe they would be ok.
But it's too late now.

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