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Why RIM's Days Are Numbered

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In 1999, Research In Motion (Nasdaq: RIMM  ) invented the smartphone and revolutionized the mobile industry. Ten years later, 50 million BlackBerry devices had been sold and RIM's stock was soaring. Fast-forward to 2012, and shares are down more than 90% since their mid-2008 highs -- and for good reason.

The once mighty BlackBerry maker's failure to adapt, paired with a string of bad decisions from top-management, sent RIM spiraling out of control. Shareholders who were along for the ride have lost billions in the process. According to Bloomberg, at the end of February short interest in RIM reached the highest level since 2004. Still, some investors are counting on a turnaround. My advice to such wishful thinkers: Don't hold your breath. 

RIM's chance of recovery is slim
I want to believe in RIM but the company is making it impossible. Until it revolutionizes something other than its management, it will continue to lose market share to competitors Apple (Nasdaq: AAPL  ) and Google (Nasdaq: GOOG  ) . Apple recently conquered the BlackBerry maker on its home turf, selling more iPhones in Canada than RIM sold BlackBerrys. Meanwhile, Google still trumps both RIM and Apple in sales, because the Android system is not limited to a single smartphone maker, the way that RIM and iOS are.  

It's not as if RIM landed itself in this position overnight. The company's been losing market share for years, while management idly stood by. After nearly two decades of running the business into the ground, joint-CEOs Jim Balsillie and Mike Lazaridis finally resigned. Following their exit, RIM's share of the U.S. smartphone market plummeted, hitting an all-time low of 15.2% in the three months ended in January. Now with a new CEO in place, the company is doing more of the same.

When smartphones get stupid
RIM's lead in the mobile market was a result of its stronghold on corporate enterprise. Flash back to 2007, when BlackBerrys dominated the business world -- a time when no self-respecting executive was ever without his or her "crackberry." Today, that's changed. More global businesses are offering employees alternatives to the company BlackBerry.

For starters, Apple recently inked an enterprise deal with Halliburton, one of the world's largest oilfield-services companies. Under the agreement, Halliburton employees will swap their BlackBerry devices for iPhones. With its next-generation iPad on the market, Apple's on its way to the enterprise big time. And I suspect we'll see more companies like Halliburton transitioning to the iOS platform in the near future.

RIM, on the other hand, managed to drive millions of loyal BBM-ers into the arms of the competition. This outcome was inevitable, considering the company failed to update its platform, while others innovated. And let's be honest: Unless RIM creates a smartphone that doubles as a Roomba to clean up the mess the company has made, consumers and businesses are going to keep choosing iPhone and Android devices over Blackberrys.

A eulogy 
Both of the lead mobile-platform companies have something that RIM does not: rich ecosystems of applications. Apple has the App Store, while Google has dubbed its new marketplace Google Play, and both are locking in meaningful sales along the way. RIM has attempted to step up its defense with the new BlackBerry 10, but even that has been delayed. I don't think RIM will ever fully recover, even if it's able to launch BlackBerry 10 before Apple's iPhone 5 launches later this year.

While I'm not shorting the stock here, I'm surely not buying shares on the false hope of a comeback. Apple and Google are winning because they understand that a device is only as valuable as a consumer's experience of it. Instead of playing catch-up, RIM needs to get back to its roots and start innovating. I've lost all confidence in RIM, which is why I'm giving the stock an underperform rating on my profile in Motley Fool CAPS.

Instead of waiting for this turnaround story to come to fruition, I invite you to read a special free report from The Motley Fool's leading analysts, titled "3 Hidden Winners of the iPhone, iPad, and Android Revolution." With smartphones and tablets selling faster than traditional PCs, there are enormous opportunities for investors in this market. In this free report, you'll be surprised to learn which stocks are really cashing on the massive growth in the smartphone industry. Get instant access to the report -- it's free.

Fool contributor Tamara Rutter owns shares of Apple. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insights and investing ideas. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Google and Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (17) | 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 Report this Comment icon found on every comment.

  • Report this Comment On March 26, 2012, at 7:41 PM, ericAZ480 wrote:

    In one way I feel bad for RIM. When a company like Apple comes along, and a now historically significant innovator like Steve Jobs makes his mark. A "commonly" successful company like RIM will suffer.

    Why does Android succeed? Because they copied the great innovator. Fortunately, the Android experience doesn't hold a candle to the iOS experience.

    Regardless, it's almost unfair to compare ANY company's ability to innovate with Apple's or Jobs'. These are once-in-a-lifetime phenomena.

  • Report this Comment On March 26, 2012, at 8:01 PM, alvin wrote:

    I'll agree with you that rim has screwed up badly. I'll even say that google's android will dominate in the near future. However, I don't see how you can conclude Rim will go bankrupt.

    You're talking about a company that has zero debt, continues to be profitable, has a book value of close $20/share, and grew their subscriber base from 50 million to 75 million in one year. The smart phone market's general growth is offsetting Rim's decline in market share.

    Plus, they bought QNX which is a very underrated os. It is already used everywhere because it's real-time and super stable. If Rim was loaded with debt and barely making a profit, I'd maybe agree with you. I am long RIM.

  • Report this Comment On March 26, 2012, at 10:58 PM, BakoD wrote:

    NO debt. P/E of 3.3, good book value - they're down, but I wouldn't count them out just yet. I'd wait until Q3 before sounding the death knell. I'm just waiting for the squeeze. Also, if the Fool says don't buy - buy!

  • Report this Comment On March 27, 2012, at 1:42 AM, pinks2000 wrote:

    They need to slavishly copy the iPhone like everyone else. They are either too honest or too dumb to do it (or both). Maybe they actually have some integrity, or maybe they are just too proud to do it.

  • Report this Comment On March 27, 2012, at 3:21 AM, alvin wrote:

    Kodak went bankrupt because of the invention of digital photography. Digital photography was huge paradigm shift in photography. Anyone with a brain would have seen the huge impact digital would have and the inevitable demise of film photography. Also, Kodak was bleeding money for years and their balance was definitely not pristine. There hasn't been any paradigm shift with respect to smart phones.

    Also, Rim is profitable. That last quarter included a one time inventory write down of around $400 million and they still made $0.51/share. Also the consensus earnings for rim for years 2012 and 2013 are all above $2.00/share. Even the most pessimistic analysts don't project negative earnings so how you guys even jump to the conclusion of bankruptcy is absurd.

    Again, you don't realize how great the QNX architecture is. QNX is already being used everywhere (for many years) because of it's super reliability (real-time). It's used in pretty much every industry you can think of (e.g. nuclear power plants, surgical equipments, cars, air traffic controls, etc). NASA uses it all the time. You really should read about it before you dismiss it as a blunder.

  • Report this Comment On March 27, 2012, at 3:26 AM, alvin wrote:

    sorry, left out a couple of words in my sentences. I think it's still understandable, though.

  • Report this Comment On March 27, 2012, at 10:28 AM, daveraj wrote:

    When in doubt about what to write, a Fool will write another broken record Rimm hit-piece. Nothing new here. Yawn.

  • Report this Comment On March 27, 2012, at 11:38 AM, daveraj wrote:

    I just noticed you own shares of Aapl, like I do. But you should be barred from writing articles about their competition like this. Not Kool.

  • Report this Comment On March 27, 2012, at 12:24 PM, ampezzi wrote:

    The article of the day against Rim.

    The new analyst sickness.

    The old market manipulation. always.

  • Report this Comment On March 27, 2012, at 5:01 PM, alvin wrote:

    "QNX is a blunder"

    I'm guessing you've never written a line of code in your whole life.

  • Report this Comment On March 27, 2012, at 5:35 PM, alvin wrote:

    "QNX is a blunder"

    I'm guessing you've never written a line of code in your whole life.

  • Report this Comment On March 27, 2012, at 7:13 PM, momakhadmi wrote:

    I think your looking too much into "right now". Yes Blackberry has put them selves in a tough spot. Loosing a huge market share of the smartphone industry. I think their major problem has always been their outdated O.S. Yet, With their new Blackberry 10 devices I think we will definitely see a turn around. I say this because the Apple is doing what blackberry has done with their current devices, nothing. The I O.S has been the same since it came out. The hardware is nice, but they haven't come out with anything new or innovative that is a game changer. Android I think will be the main competitor due to its brilliant innovations and that its available across many different cell phone companies that create unmatched hardware. Yet, back to the topic, RIMM knows it needs a jump start, something different to bring it back to life. They know its now or never, hence the reason why they delayed Blackberry 10 lunch. Any one with a background in economics will tell you that your wrong. Sometimes a company needs to be in the position that RIMM is in, in order to come up with new innovations. Remember Apple complaining about Microsoft controlling the computer market? They seem to be doing just fine at the moment. I ultimately believe the new Blackberry devices will bring RIMM back in the game. I think investors will also want to look at Nokia, because their about to do the same thing. But RIMM's shares will go up, and I believe even higher then many will anticipate.

  • Report this Comment On March 27, 2012, at 8:48 PM, alvin wrote:

    You really have no idea what you are talking about.

  • Report this Comment On March 28, 2012, at 11:34 AM, daveraj wrote:

    I think RIM killed his dog. He HATES RIM so much that 99% of his posts are about how they are the worst company in history. Worse than Attila the Hun and Enron combined. Alot of time spent on hating something. He definitely brings a Yahoo! boards feeling to the Fool. Nevertheless, his posts still makes me chuckle.

  • Report this Comment On March 31, 2012, at 1:26 AM, qualledd wrote:

    RIMM is toast....the stock will continue to drift lower till the market cap is attractive enough for APPLE or GOOGLE to purchase RIMM for it's intellectual property.

    My guess it will get to the $5 area and they will be bought.

  • Report this Comment On April 12, 2012, at 6:30 AM, infektu wrote:

    This Haliburton story gets copy-pasted ad nauseam.

    Why don't you also quote every important account that RIM has gained over the last couple of months? Just to offer a balanced view.

    I'm not saying that RIM will ever get 80% of the market, but they have a good offer, an even beter one coming up in the next few months and they are here to stay.

  • Report this Comment On November 26, 2012, at 9:15 PM, Amanda1234 wrote:

    Speaking from experience - I was with blackberry for a while - and I am glad l left blackberry being honest it was the best decision ever.

    The apps and games where rubbish. But what made me personally go for the iPhone.. I was paying for themes, apps & games. Then blackberry would have the check of asking for more money for up dates.

    Blackberry are awful and their big callings they are not listening to what people want. You can't even use skype on the blackberry phones.

    Where with Samsung, apple and many others have listened to what people want.

    Blackberry have brought alot on them selfs. I doubt they will be here in the next 5 years coz it's a little too late.

    BBM - on the blackberry ten are offering free wifi calls ... Big whoopie... So what they need to do more than that if they want to stay on top..

    Blackberry are crap - let's just be honest.

    Their phones are rubbish and the playbook - that was a joke.

    They have just brought out the new playbook on 3G -- and they are saying that's new...

    Even their phones have bin running 3G for a while..

    I personally don't see them lasting much longer. They need to wake up and move on with the times.

    Blackberry have done the damage them selfs. Yes Blackberry have made some beautiful phones but their soft ware lets them down.

    From being a blackberry user - when l sore how much the iPhone4s did and how much better their software and apps where. I knew right the blackberry is going.

    Sorry blackberry are crap - pure & simple and being honest l totally agree with the article.

    I don't see them lasting - it's a Little too late. I know alot of people leaving blackberry and too behonest l don't blame them - get out now while u can...

    R.I.P BlackBerry ( Crapberry ) as l call them lol x

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