It goes without saying that Canadian smart device maker Research In Motion (NASDAQ: BBRY ) has seen more dark patches and recent bright spots over the last 18 months that many companies see in a lifetime. Left for dead by most tech investors, the company's stock price fell almost 90% from its all-time high in 2008 as a series of humiliating management blunders and the entry of several massive competitors eclipsed the once-king of the smartphone market. However, after purging its upper ranks and installing CEO and President Thorsten Heins a year ago, the company has undergone a transformation that has the potential to serve as a full-fledge resurgence for RIM (albeit an unlikely one).
Regardless, the company's share price has been on an absolute tear lately, doubling over the last six months and instilling a newfound hope in many that had given this company up for dead. With the impending launch of its next-gen BlackBerry 10 mobile OS due Jan. 30, the future seems as murky as ever for Research In Motion. And it was in that spirit that the Fool recently compiled a premium research report on RIM to highlight its long-term outlook. Included in the text below is a brief excerpt of this report. Enjoy!
3 reasons to buy
- Even if RIM were to fail and need to be broken up and sold off in pieces, RIM's depressed valuation makes it possible that a sum-of-its-parts approach could potentially fetch more. The company's patents could bring in billions, especially with the recent frenzy over IP. The networking operations serve many enterprise and government users, so RIM shouldn't have too much trouble finding a buyer. Even if investors ignore the handset business and assume RIM burns through all its cash, there have been estimates that the IP and networking business could be worth up to $4.25 billion -- more than RIM's current market cap.
- RIM's paying subscriber base remains at all-time highs, with 80 million users last quarter. It's encouraging that despite the company's recent troubles, this subscriber base has continued to steadily increase without posting any sequential losses in the past several years. This is one of the silver linings in RIM's business.
- The launch of BlackBerry 10 could potentially be an inflection point for RIM, and everything is riding on the platform's success. If the operating system is everything RIM hopes and it takes off, then its darkest days could be nearing an end. Even if BB10 only strengthens RIM's position among its core user base, that could be seen as a win.
3 reasons to sell
- iOS and Android have absolutely crushed RIM in the consumer market, along with just about every other operating system platform. RIM has fallen far behind the competitive curve in many important areas, including ecosystem strength. The company is now scrambling to regain its footing, but its chances of a successful turnaround are remote.
- The enterprise was once a core market for RIM, but the consumerization of IT has allowed iOS and Android to also invade this segment. It used to be that corporate IT managers would make the purchasing decision on the behalf of enterprise users and RIM's security features allowed it to land contracts. Nowadays, IT departments are embracing bring-your-own-device policies, so RIM needs to appeal directly to consumers, which it's not doing very well right now.
- The PlayBook has been a disappointing attempt to tap the growing tablet market. Due to weak demand for the device, RIM recorded a $485 million pre-tax provision related to inventory writedowns two Decembers ago. It was forced to impair the value of its excess PlayBook inventory, and pursued additional promotions to drive sell-through.
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