What to Expect From Research In Motion in the Second Half of 2012

Research In Motion (Nasdaq: RIMM  ) has been spiraling out of control for some time now. The company's stock is down more than 48% so far this year. But can the bruised BlackBerry maker turn things around during the second half of 2012? A comeback would require RIM to have learned from its previous mistakes. Unfortunately, that doesn't seem to be the case.

Now that we're midway through fiscal 2012, let's look at where the company has been and where it's headed in the remainder of the year. One thing is clear -- a successful about-face is no longer a realistic outcome for RIM. At this point it's a matter of whether the BlackBerry maker can maintain any market share at all in the mobile space.

Flashback 
RIM didn't get itself in this position overnight. A string of bad decisions from top management crippled initial efforts to save the business. While joint CEOs Jim Ballsillie and Mike Lazaridis finally resigned, it proved to be too little too late. Following their leaving, RIM's market share hit an all-time low of 15.2% in the three months ended in January.

In addition, the company spent the earlier part of this year ignoring competitors' advancements. In March, Apple (Nasdaq: AAPL  ) beat RIM on its home turf by selling more iPhones in Canada than RIM sold BlackBerrys. Google's (Nasdaq: GOOG  ) Android system also continued to rob RIM of market share.

Once the leader in enterprise business, RIM failed to update its platform along with its rivals, and as a result more global businesses are now offering their employees alternatives to the company BlackBerry. Apple has benefited the most in this regard.

In an attempt to revive its floundering business, RIM tried its luck in the tablet market with the launch of its PlayBook device earlier this year. Sadly, the dirt cheap BlackBerry PlayBook proved that it takes more than competitive pricing to win the hearts in consumer electronics. Besides, I still don't understand how RIM thought enterprise-grade security on the device would be enough without native email, but I digress.

Another missed opportunity
Introducing an iPad challenger should have come naturally to RIM. Let's not forget that the company was once a leader in the mobile industry. However, it failed to execute at a critical stage in the game. Today, even software giant Microsoft (Nasdaq: MSFT  ) is making waves in the tablet space.

The recently unveiled Microsoft Surface isn't expected to hit the market until this winter -- yet it already promises to make a bigger splash than the BlackBerry PlayBook ever did. One of the reasons the Surface has a better chance of success than RIM's PlayBook ever did is Microsoft's growing ecosystem of content.

For a rival tablet to be a true iPad contender, it needs a rich media ecosystem. Apple has the App Store, while Android-powered devices rely on Google's online marketplace, Google Play. In fact, Amazon.com's (Nasdaq: AMZN  ) Kindle Fire tablet owes a significant portion of its success to its growing media marketplace.

These days you can buy just about anything from Amazon's virtual store. Consumers can purchase e-books for reading on their Kindle Fire or stream movies and television shoes on the device. True, Amazon is still playing catch-up to Apple and Google in music and video downloads. But at least it's in the game -- and at this point that's more than RIM can claim.

Looking ahead
With JPMorgan Chase and RBC Capital Markets now in its corner assessing the always infamous "strategic alternatives," perhaps RIM can muster a worthy alternative to its failed turnaround strategy. In the meantime, ongoing delays with its BlackBerry 10 operating system will continue to damage RIM's share price. The company may also face greater operating losses in upcoming quarters, despite management's decision to cut thousands of jobs.

Going forward, RIM's new chief executive, Thorsten Heins, plans to reduce the number of BlackBerry products in the company's portfolio. According to the Financial Times, "RIM plans to shrink its external manufacturing partners from 10 production sites to three by the end of the year." The downsizing is one of many efforts by management to counter declining BlackBerry sales.

In addition, if RIM ever gets its next-generation BlackBerry 10 platform off the ground, it hopes to license the new operating system. Potential licensing deals are a step in the right direction, although it's a step RIM should have taken a year ago.

While some analysts have speculated that a buyout is on the horizon, I doubt anyone will acquire RIM before a successful launch of its long-awaited BlackBerry 10. Heins said the company would spend the rest of 2012 focused on finishing software integrations for a 2013 launch of its BlackBerry 10 smartphones.

A better play for investors
Time is running out on RIM to sell itself at a significant premium. Yet despite RIM's troubles, the mobile industry is booming. Investors can take advantage of growth in this market by choosing companies that have lucrative expansion strategies in place, competitive product portfolios, and visionary leadership -- all qualities RIM currently lacks.

If you're not sure where to start, I encourage you to read this special free report from The Motley Fool, titled "The Only Stock You Need to Profit From the New Technology Revolution." In it you'll learn one surprising stock that's changing the face of business. The Motley Fool's top analysts also reveal how you can cash in on emerging trends in the industry. Get instant access to your free copy of the report. Or to wrap your head about all angles of the Apple investment thesis, you can pick up your copy of the Fool's new premium research report on Apple. It touches on both the positive and negative aspects of the iEverything maker and includes 12 months for of free updates. Grab yours today!

Fool contributor Tamara Rutter owns shares of Apple, Amazon.com, and Microsoft. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insights and investing advice. The Motley Fool owns shares of Google, Amazon.com, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, Amazon.com, and Apple and creating bull call spread positions in Apple and Microsoft. 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. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 22, 2012, at 6:57 PM, jopow wrote:

    Generally, I try to be supportive of authors that comment about RIM, but, in this case, this article is half-baked and incomplete and way to elementary.

    RIM's troubles are traceable critically to the insufficient Storm touchscreen phones from a few years ago. RIM's already troublesome OS and Internet Browser, coupled with the poor touch operations, was the marking point for jettison by RIM's most important customer, Verizon. Verizon was in great trouble with the AT&T monopoly with the first models of the IPhone. Verizon practically pleaded with RIM to give them a decent, competitive phone to challenge AT&T and Apple.

    Unfortunately, the RIM engineers could not get the job done and the Storm models, #1 and #2 flunked and Verizon allied with Google's new Android phones. Verizon began to heavily promote Androids, and eventually, RIM's special niche in the USA was fast adrift and degrading.

    Mike and Jim were enamored with the International opportunities and China, so that they through their muscle into that area. That gave some extra subscriptions and decent revenues, but, the North American loss widened, and the competition attacked into RIM's international strategy.

    Meanwhile, Mike and Jim were stuck on what new OS could they move to beyond their current one that was technologically obsolete. Their engineers were unable to come up with anything for the future, so that Mike and Jim bought QNX. At that time, in early 2010, Mike and Jim boasted that QNX was going to be a great software for autos and maybe some day for phones. Shortly thereafter, Mike and Jim announced that they were going to re-focus and dedicate the engineers to create a QNX playbook. Money and time and talent was going to be put into the Playbood to complete with the unexpected success of IPad #1.

    That was one of the major key mistakes in 2010.

    Instead, if RIM did not have a new generation OS from their own engineers, then, they needed to convert QMX and all of its engineers to create a QMX based BB phone. Nope, they elected, fatally, to do the Playbook, leaving the BB phones to run on BB 5-6-7, the old platform.

    We all know that the Playbook release in 2011 was a disaster, along with the heavy falling BB 5-6- sales.

    Ultimately, Mike and Jim did turn to a BB QNX phone, and that was way too late and 80% of why they are in this spiral of death.

    They are done. It will be impossible to recover. Right now, they cannot sell enough BB 10 phones to make any profit or change in the direction. They will lose the 80 million subscribers and have to go down to 40-50-60 maybe. They will need to lay off more thousands, to stop cash burns. They will then be a shell and begging for a merger or partnership.

    Again, it is over, and this is a death sentence for them. 90% of experts see this and predict this, and so why fight the experts.

  • Report this Comment On July 22, 2012, at 7:07 PM, criticalfool wrote:

    What a bunch of losers trashing RIM again and again.

  • Report this Comment On July 22, 2012, at 8:15 PM, H3D wrote:

    "In addition, if RIM ever gets its next-generation BlackBerry 10 platform off the ground, it hopes to license the new operating system."

    I hope to be President of the United States.

    I wonder which of us stands most chance.

  • Report this Comment On July 23, 2012, at 10:17 AM, jopow wrote:

    Info is correct, and I did not get into the culture issues with RIM. Actually, there will be books written about RIM's collapse and it will be studied in Business Schools on how a large corporation was mis-managed in only a few short years to the brink of---lets say a Palm.

    The story is not over yet, because there is no way that Heins is able to achieve any kind of turn around with this own gaffe's and mis representations and mistakes to date.

    Heins is not believable any longer on what he has to say.

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