Research In Motion: The Beginning of the End

Research In Motion (Nasdaq: RIMM  ) is at it again. Its shares tumbled 5% after Peter Misek, an analyst at Jefferies, predicted that there is a good chance of RIM faltering (once again!) in the fourth quarter. Shareholders of the beleaguered BlackBerry maker should brace themselves for another poor quarter when the company comes out with its earnings later this month.

Misek is known for the accuracy of his earnings estimates about the smartphone maker, and his latest prediction is hinting at the fact that RIM's march to Waterloo is set to continue. Let's see why.

BlackBerry 7 bites the dust
RIM had announced a slew of new phones running on the OS 7 last year. It looked like some sort of a stopgap arrangement for the company, which kept delaying the launch of phones based on BlackBerry 10 (previously called BBX). But what it really offered was just a minor upgrade over the BlackBerry 6 platform, something that failed to provide any relief to the company's dwindling market share.

The OS 7 phones have proved unsuccessful in reversing RIM's fortunes in the U.S. Also, the company has to now contend with strong rivals and declining sales in Europe and Latin America as well. Apple (Nasdaq: AAPL  ) now has almost half the U.S. market in its bag and Samsung, powered mostly by Google's (Nasdaq: GOOG  ) Android platform, is making significant headway in the European market. These developments leave RIM with little space to flex its muscles, adding more to the troubled BlackBerry maker's woes.

Out of corporate favor
BlackBerry smartphones were, at some point, the trusted companions of professionals all over the world. But now it seems they have fallen out of favor with their target audience. News about corporations and businesses shifting to other platforms such as Android and Apple's iOS is nothing new.

Take oilfield services company Halliburton as an example. The company ditched RIM and opted for Apple's offering as the iPhone was a "better fit" for its employees owing to the wide array of available applications. And again, just a few days ago the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives notified that it will also be dumping BlackBerrys in favor of iPhones. And I won't be at all surprised if more news like this emerges in the future.

Blackberry 10 may not be a savior
In one of my earlier articles on RIM, I spoke about why the company needs to fast-forward the launch of BlackBerry 10. But even that may not be a savior now. With the iPhone 5 rumored for release in fall of this year, it seems that RIM's face-saving offering won't protect it when released later this year (if there isn't another delay).

Moreover, the evolution of Apple's and Google's platforms will probably make RIM's BBX appear outdated when it sees the light of the day.

Have they finally lost faith?
It seems like RIM is now counting on others' flaws rather than its own strengths. For instance, new CEO Thorsten Heins remarked, "When the first big security flaw even happens in one of the large enterprises, you will see this turn around. Wait for the day this happens." What does he mean? Is he counting on the possibility that others may not produce a secure device? If this is the case, I believe there is something seriously wrong with the way RIM is looking to run its business. The company should look to improve user experience instead of expecting customers to come its way when other manufacturers falter.

And when a government organization (i.e. the Bureau of Alcohol, Tobacco, Firearms, and Explosives) decided to move away from its secure system to the iPhone, the security bit he was harping about must have blown up in Heins' face.

The Foolish takeaway
The odds are stacked heavily against RIM. I haven't even told you about the Playbook fiasco and the speed at which Samsung and Apple are selling their phones. All these factors taken together may completely take down the remnants of the mighty empire that RIM once was. A lot of hope is pinned on the "make or break" BlackBerry 10, but even then the chances of a bounce-back remain quite slim.

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

Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google and 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.


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  • Report this Comment On March 06, 2012, at 8:00 AM, MotMor wrote:

    Yea blackberrys are crap phones. iPhones are really the only phones worth having. Even Android phones aren't as cool as iPhones. iPad is the only tablet worth having. The iPad 2 was much better than the iPad and iPad 3 will be even better. RIM is a POS and will not be around much longer. All their stuff is good for is communication, but for gaming, surfing the net, listening to music, taking pictures and editing photos only Apple products measure up and compared to them blackberries are crap.

  • Report this Comment On March 06, 2012, at 10:20 AM, gilsh wrote:

    I beg to differ.

    I still remember articles lamenting Nokia. Anyone still thinks that big NOK is dead ? Or has the the news regarding their successful cooperation with MSFT and the new and remarkable technology they have in their phone camera made some reconsider ? http://websightstory.blogspot.com/2012/02/nokia-still-has-it...

    If NOK are able to return to a technological lead of sorts out of the ashes, I wouldn't hurry to bury RIMM. Especially as there is one basic flaw in all of the analyses mourning the Canadian smartphone vendor:

    On the one hand, everyone talk greatly about the importance of emerging markets. On the other hand, everyone ignore RIM's position in those markets, and more importantly - the trend the corporation has there.

    Now don't get me wrong - RIM is a dangerous investment. This is a business whose moat has been broken through by at least two formidable opponents - Apple & Android-based Samsung.

    But as NOK & MSFT's return to the arena indicates many customers will stop to make sure they aren't going the too-expensive way with Apple or the too-open way with Android, they just might take another look at the once-upon-a-time corporates' cellular gadgets honey.

    And one last comment: RIM's CEO's remark about security wasn't trashing competition, but reminding everyone, that RIM still has one clear edge over everyone else: this is the only smartphone that has secured enough communications to bother security forces all over the world.

  • Report this Comment On March 06, 2012, at 4:14 PM, jitu1011 wrote:

    Hi Readers!

    We have to accept the current facts and performance analysis done by various research analyst for Research In Motion. I once again emphasize on words "research analyst" also prominently to one of famous S&P who recently forecast that RIM may announce before its prospected result date, Seriously are these analyst and researchers turned to astrologers and fortune predictors so that they able to see what a company can do in next week which might be even not in knowledge of senior executive. I think this is done to bring feeling of panic in market and between general investors who are holding RIM with a fundamental view point of its strong balance sheet.

    I strongly believe there is no factor we can see for RIM to go bankrupt or shut down, based on strong $1 Billion sales each quarter which more than enough to support its existence. Also considering the smartphone market which is just 5-6 years old apple has no existence before, not to forget APPLE filing of bankruptcy in 1999. Thumps up to RIM CEO's for managing it since tough times to uphold it from falling so bad to take severe steps for bankruptcy which there current competitor took.

    If we just set aside the comparison of Blackberry products from Apple Phone, prominently because both does not fall in same category of technology, and Yes I seriously mean it. Blackberry is secured business communication device and support all business applications required with great level of service and satisfaction. whereas Apple products are battery driven mobile music devise which is compatible to make phone calls and emails and some gaming with help of third party software vendors. Now just see the true picture in my words and yes it is a true fact.

    Apple is a marketing company who integrates salient feature of music(i-pod) to phone service in to one device with help of software vendors, so actually APPLE is not an expert. We know RIM is a technology company who invented the idea of email over phones with security of data and attached files.

    Now let me explain you the risk and reward matrix of investing in RIM stock.

    RIM trading at CMP $13-14 with EPS $4.18 and dam cheap P/E of almost $3. comparitive to highly priced APPL whose product are selling at higher prices and less persistent sale of its own base product line. means if no new product is expected to launch APPLE fear diminished sales. Also after cheating its own customer for decreasing base price of its old product by 15% in lieu of attracting customers for new launch in pipeline APPLE has no loyalty. So we cant expect AAPLE to keep introducing any more apples like he did with I-phone3 3GS 4G and 4GS in last 3 years.

    RIM even if unable to make a turnaround with launch of BB10 has good potential of inventing new product line based on its experience with software and prominently that we can expect with playbook in coming years. Also much talked pact with Amazon can surely bring great wonder in world markets due to their expertise and experience of large based subscribers. So if such thing happened and surely not ruled out totally RIM stock would see the sky i.e $300 in two years.

    If still the current scenario for RIM does not change RIM will surely get benefit from high market competition as NOKIA, SAMSUNG, GOOGLE will target APPLE more than already beaten RIM. so RIM present and future is both safe in comparison to APPLE.

    There is new management change at RIM board and certain movement of ownership has seen in books of big investors which bring great surprise for opportunist investors. So from fundamental point of view it is understood that new and inexperienced research analyst need topic and company to write and talked about so they always ride on trend to make rhyme against RIM to tell the world that they can read balance sheet. I have a question for all of them why they are not telling investors about sudden rise in volume of stock trading at index and ownership of stock by some prominent investors.

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