Should You Buy Research in Motion Now?

Investors in Research In Motion (NASDAQ: BBRY  ) had the misfortune of seeing their stock decline more than 23% in 2012. In the midst of a massive overhaul, the beleaguered tech company saw continued market share erosion along with unexpected delays in its saving grace, its new BlackBerry 10 operating system. Though the year as a whole saw a major decline, it may come as a surprise that the stock gained nearly 72% in the final three months of the year. 2013 will (finally) be the year of the company's first major release in a long time and should act as an early bellwether for management's turnaround efforts. Should RIM be a part of your portfolio in 2013?

Third-quarter recap
RIM released its fiscal third quarter earnings late in December when some investors had already checked out for the year. The company managed to beat revenue expectations of $2.66 billion by a substantial $70 million. While it was still a year-over-year decline of roughly 47%, the company nonetheless beat the Street. On the bottom line, EPS came in at a loss of $0.22 per share, beating expectations of a $0.36 per share loss. Those numbers were buoyed by a healthy 30.4% gross margin. Most importantly for a stock in deep turnaround, the company maintains nearly $3 billion in cash, with no debt, to continue its recovery.

Despite the seemingly good news, though, the stock ended down the day of the earnings release. Why? Management noted in the press release that it may cut its service fees in order to retain customers in the interim, which worried some investors and analysts who are clinging to the valuable service fee revenue.

Research In Motion may not have been the turnaround story of 2012 (nor may it be that in 2013), but I believe the company was able to prove at least one thing -- it is not the dying star that it was believed to be just six months ago. CEO Thorsten Heins is working hard to prop up the company and bring it back to tech relevance.

Looking forward
So, depending on when one invested, Research In Motion was either tough to stomach or a highly valuable stock pick in 2012. But that's over, so what's on tap for the new year?

For one thing, as mentioned, the company is rolling out the highly (and long-) anticipated BlackBerry 10 operating system and Z10 smartphone. Currently in beta testing, the new phone and accompanying software have managed to make positive first impressions. The official public launch is Jan. 30, but much information has already been gleaned by the tech world.

The Z10 device will likely be larger than the competing iPhone, and will be full touch like its competitor and many of Samsung's Android phones. Regardless, though, of early tracking, RIM has the nearly impossible task of getting consumers to favor its new device and software over that of Apple and Samsung. The two smartphone leaders have, by this point, long passed RIM in desirability. As we all know, once the consumer gets a concept in their mind, it is a mighty task to undo it.

The stock will likely get a boost at month's end on the release of the new phone, yet prospective investors may want to wait until a bit later in the year to see pre-order numbers. In the fiscal third quarter, the company shipped 6.9 million BlackBerrys and 255,000 PlayBook tablets. Where that number will be a year from now is anyone's guess.

One Fool's opinion 
I believe that Research In Motion may have its first rising stock price year since 2009-2010. Much more important to note, though, is that this is still early on in the turnaround process. I will not be one to expect major, life-changing events for the company in 2013. Remember what guru investor and RIM's largest individual shareholder, Prem Watsa, has said multiple times—this is a long-term play, five to seven years -- if not more. If you are looking for a quick play on a deep-value stock, this is not the place for you.

As for those who are comfortable with a long-term investing horizon and the inherent risks, RIM may be near its best price for some time. The stock did gain major ground in the final stretch of 2012, but I am not expecting too much of a correction, as its previous pricing was absurdly undervalued. As always, do your homework and do not invest outside of your comfort zone.

2013 and beyond
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (6) | 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 January 07, 2013, at 7:24 PM, Arthur1111 wrote:

    This is one of the best articles I have read from the Motley Fool regarding RIMM. Usually I read extreme biased articles that did not make sense.

    I used to trade RIMM; however, I have been long since September after the surprise subscriber increase. I made over $100,000 since then. I plan to stay long as long as I see potential for growth, and believe me, it is substantial at this point.

    RIMM is one of the best investments for 2013. Don't wait until January 30, you will miss a lot.

  • Report this Comment On January 07, 2013, at 7:35 PM, TimKnows wrote:

    RIM has the best OS experience yet with BB 10, to think of going back to i OS after having a run at BB's new OS is crazy. Apple is going to get pounded in 2013.

  • Report this Comment On January 07, 2013, at 8:41 PM, cyworld wrote:

    Hmmm, it is strange. I am an IT guy to support BB users in my organization. Not even a single user signed up for BB for last qt, but several BB users switched to iPhone and more BB users will leave BB regardless of BB10 launch. I guess only BB users in my organization don't like BB any longer. More than 200 BB users were in my organization and the number is going down every day.

  • Report this Comment On January 07, 2013, at 8:55 PM, digitally404 wrote:

    Over 4,000 BB users at my organization, which will be upgrading to BB10.

    Good software on Android / iOS devices is absolute garbage. Many users have complained about it due to lag, sync issues, and freezing.

    BB10 is going to stick and it's just the first step. 2013 is definitely going to get a whole lot more exciting for RIM and consumers alike. Especially since they've loosely let it known that there will be many products released by them this year.

  • Report this Comment On January 08, 2013, at 1:28 AM, avgdown4evah wrote:

    digitally404 is a pathetic liar, and InfoThatHelp is still LoserThatFail. Why does RIMM attract such namby pamby bagholders? It's a question that might never be answered.

  • Report this Comment On January 08, 2013, at 1:59 AM, TimKnows wrote:

    We employ 168,000 across NA and we are not allowing any Android phones from this point on. We are looking at WP8 and BB 10 and in every case we'll connect them all to our servers via Mobile Fusion. The demand for BB 10 is running at 73% so far with Apple coming in at 9%. We suspect that close to 80% of our phones will renew in 2013 with as many as 80% of them to be BB 10 phones. RIM is far from dead as many of the converts are former iPhone users. The biggest selling point for RIM is Service, it doesn't exist with Apple. Apple has had forever to develop Enterprise Service and they have done nothing about it.

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