Netflix fried; RIM toast; here's why you're wrong

[Jawbone220]

Interesting article I read courtesy of TREFIS while browsing my shares of RIMM. Thought I'd pass it on.

https://www.etrade.wallst.com/v1/sto...bols=undefined


Netflix is Fried, RIM is Toast And Heres Why You May be Wrong
12:50 PM ET 1/31/12 | TREFIS

When you believe Netflix (NFLX) is fried, and RIM (RIMM) is toast, it is worth considering that there is a chance, just a possibility, the problem may be that you havent factored the entrepreneurs behind these companies and what they can do.

We love to extrapolate, and forecasting is important. However, we often use our own understanding of what is doable, rather than thinking carefully about the magicians behind the magic performed to date.

Entrepreneurs are different beasts, they don’t think linearly. Survival, combat, and springing back is second nature to them. Chances are the entrepreneur who has built a $1 billion dollar business from scratch, or even a $100 million dollar business from scratch, has way, way more non-linear thinking, and springing-back capabilities than you and I can ever imagine.

Interviews don’t teach a reporter those skills, and watching the entrepreneur as an investor doesnt teach those skills either. Earning a large paycheck at a big company and growing a business is, well, different. Spending a month with the entrepreneur might help you appreciate some of what they can do, however, it doesn’t cut it either. The truth is, there is no royal path to learning what people like Reed Hastings and Mike Laziridis have learnt the hard way.

In fact, at Trefis we forecast trends all day long to build an understanding of the intrinsic value estimate of a company. My hope is, consistent with Trefis’ mission, my views here will provide a lens into better business decision making, when analyzing entrepreneurial companies.

So when someone writes about RIM is toast, or Netflix will never bounce back, I wonder about the linearity in thinking. I wonder about the gross simplification and lack of understanding that thinking reflects of the entrepreneurial process and the entrepreneurs behind these companies.

These people are hardened, they have earned that capability time and again, to fight back, to get up after they fall, and fall big. They have not done it once, but twice, thrice and more times than I have fingers on my hands.

But wait, you and I will say — I am seeing them fall, and look they appear awkward this time around, and look the number of subscribers are falling, and look at the rising content acquisition cost, and look at how cool Apples iPhone is, and look at the rising adoption of Googles Android, Europe is a problem along with other macro headwinds, and look their key guy just left …. and we will want to extrapolate.

But that is what makes these people different – they have learned how to fly back, out of free fall, and from cliffs so steep you and I haven’t dared to look down. Hastings looks to be already working his magic as Netflix posted a rebound in subscriptions in the most recent quarter to the surprise of many. While Laziridis has stepped down and handed the reins to one of his top lieutenants, he remains a large shareholder and no doubt will be instrumental in RIM’s recovery efforts in the coming years.

So pause, reflect, and think about these top class entrepreneurs, their early teams before you go short that stock, or bet your time and money against their businesses.

It doesn’t come easy to them. They don’t take it lightly when they hear RIM is toast and Netflix is fried, and they are flexing the same thought process right now that they have so mastered in building their billion dollar companies from scratch.

Their blood boils, and the worst externally, might bring the best out of them one more time, just like it has numerous times in the past. If you wish, sure go ahead and bet against them, but I do think exercising thought, caution, and a bit of non-linear thinking will help. There are magical people behind these companies – and I am not just talking their leaders, I am talking their entire early teams. They all have something we need to at least start dreaming about.

[Superfly_FR]

Ich bin ein Entrepreneur !

Nice article, thanks for sharing.

[Dapper37]

Good read..

[jimmyfallon]

interesting

[newcollector]

The article really does highlight that amazing ability of the entrepenuer to visualize and to respond to adversity.

[mjs416]

I think a good example of this dynamic is Netflix. Was just reading an article yesterday how Netflix lost 600,000 subscribers Q4 of 2011 but gained 800,000 subscribers thus ending the year higher than forcasted. These even despite the debacle that the CEO created by renaming and then deciding not to rename services and compartmentalizing the streaming / DVD parts of the company.

Until the company is officially re-organizing and liquidating assets - I dont think you can count any large business out like that.

[LoganSix]

Until the company is officially re-organizing and liquidating assets - I dont think you can count any large business out like that.

Seriously. But if only we had an example of a company that was losing business rapidly due to lack of innovation, was bleeding to the point it had to take money from it's main competitor in order stay afloat, then came roaring back and makes tons of money today. If ONLY there was an example like this, it would make people realize that a company that is bringing in $1 billion every 3 months and increasing market share overseas really isn't in such bad shape. Man, if there was just ONE example of a turn around like that. Oh well.

[BeyondSora]

Originally Posted by LoganSix

Seriously. But if only we had an example of a company that was losing business rapidly due to lack of innovation, was bleeding to the point it had to take money from it's main competitor in order stay afloat, then came roaring back and makes tons of money today. If ONLY there was an example like this, it would make people realize that a company that is bringing in $1 billion every 3 months and increasing market share overseas really isn't in such bad shape. Man, if there was just ONE example of a turn around like that. Oh well.

I think you meant Apple? ;p

Sent from my BlackBerry 9900 using Tapatalk

[Economist101]

Originally Posted by LoganSix

Seriously. But if only we had an example of a company that was losing business rapidly due to lack of innovation, was bleeding to the point it had to take money from it's main competitor in order stay afloat, then came roaring back and makes tons of money today. If ONLY there was an example like this, it would make people realize that a company that is bringing in $1 billion every 3 months and increasing market share overseas really isn't in such bad shape. Man, if there was just ONE example of a turn around like that. Oh well.

Unfortunately, that company rebounded by bringing back its founder, not replacing him with someone else. Also, that company rebounded by entering new markets, as its primary business never really recovered what it lost. So, in order to mimic that company, RIM will need to push into new markets, all behind a guy who didn't build RIM into a billion-dollar company in the first place.

[LoganSix]

Originally Posted by Economist101

Unfortunately, that company rebounded by bringing back its founder, not replacing him with someone else. Also, that company rebounded by entering new markets, as its primary business never really recovered what it lost. So, in order to mimic that company, RIM will need to push into new markets, all behind a guy who didn't build RIM into a billion-dollar company in the first place.

Or, now that the founder is no longer with that company, then the inevitable demise of that company is in the nearer future. And with the demise of that company, it would leave RIM to gain market share by taking back what it had before previously non-mentioned company came into that market place. And I guess not noting that QNX is currently in most automotive applications neglects to acknowledge RIMs entrance into other markets.


But, you apparently forgot to remember the push of a certain product that was paper thin like by non-said company. So, it wasn't like they abandoned their original market place at all. They in fact made significant inroads in the education field with the push of those and other similar devices pertaining to their original market place after the saving from irrelevance by their lead competitor.

[mjs416]

Originally Posted by LoganSix

Or, now that the founder is no longer with that company, then the inevitable demise of that company is in the nearer future. And with the demise of that company, it would leave RIM to gain market share by taking back what it had before previously non-mentioned company came into that market place. And I guess not noting that QNX is currently in most automotive applications neglects to acknowledge RIMs entrance into other markets.


But, you apparently forgot to remember the push of a certain product that was paper thin like by non-said company. So, it wasn't like they abandoned their original market place at all. They in fact made significant inroads in the education field with the push of those and other similar devices pertaining to their original market place after the saving from irrelevance by their lead competitor.

He who shall not be named...lol

[Economist101]

Originally Posted by LoganSix

Or, now that the founder is no longer with that company, then the inevitable demise of that company is in the nearer future. And with the demise of that company, it would leave RIM to gain market share by taking back what it had before previously non-mentioned company came into that market place. And I guess not noting that QNX is currently in most automotive applications neglects to acknowledge RIMs entrance into other markets.


But, you apparently forgot to remember the push of a certain product that was paper thin like by non-said company. So, it wasn't like they abandoned their original market place at all. They in fact made significant inroads in the education field with the push of those and other similar devices pertaining to their original market place after the saving from irrelevance by their lead competitor.

I think both companies are no longer led by their founders. The difference is that SJ never ran Apple into the ground. Also, though Apple never "abandoned" computers, their presence in computers has never been the same, which is what I wrote.

So which new markets will RIM enter? Most of Apple revenue comes from markets they've entered in the last 5 years.

[Palmless]

Originally Posted by LoganSix

Seriously. But if only we had an example of a company that was losing business rapidly due to lack of innovation, was bleeding to the point it had to take money from it's main competitor in order stay afloat, then came roaring back and makes tons of money today. If ONLY there was an example like this, it would make people realize that a company that is bringing in $1 billion every 3 months and increasing market share overseas really isn't in such bad shape. Man, if there was just ONE example of a turn around like that. Oh well.

We should start calling this the "Michael Holmes" plan.

Michael Holmes fell 12,000 feet from a plane without a parachute and lived.

Therefore, anyone falling from a plane without a parachute should not be concerned. Michael Holmes did it.

[LoganSix]

Originally Posted by Economist101

I think both companies are no longer led by their founders. The difference is that SJ never ran Apple into the ground. Also, though Apple never "abandoned" computers, their presence in computers has never been the same, which is what I wrote.

So which new markets will RIM enter? Most of Apple revenue comes from markets they've entered in the last 5 years.

It depends on what you consider the iPad. The Netwon was a tablet before tablets were tablets. Therefor, the iPad is not a new market. So, if you look at the iPad and the laptops as part of the PC realm, which analyst do, then Apple is the leading PC maker in the world as of Q4 2011. However, the record Mac sales reported in January show that Apple's share is the highest it has been in 15 years. So, by moving to OSX, Apple did manage to increase it's very small market share in the PC segment.

When RIM bought QNX, it entered the automotive market as QNX provides the OS for a lot of automotive applications. Not to mention that QNX has been around for longer than Apple.

RIM is also getting into the Music provider market and other social markets, which for some reason are worth about $10 billion in one case.

[LoganSix]

Originally Posted by Economist101

The difference is that SJ never ran Apple into the ground.

Apple made the right decision when it canned Steve Jobs in 1985

A memo from marketing director Mike Murray to Apple execs captures what Apple was like at the time:

"In my three years at Apple, I’ve never observed so much confusion, fear, and dysfunction as in the past 90 days ... We are perceived by the rank and file as a boat without a rudder, drifting away into foggy oblivion ... Whether the cause of or because of the dysfunction, Steve Jobs now controls a seemingly impenetrable power base."

Read more: Apple Made The Right Decision When It Canned Steve Jobs In 1985 - Business Insider

How Steve Jobs got fired from his own company

Jobs was Apple's chief visionary, a role that put him in charge of the team developing Apple's next revolutionary product, the Macintosh computer. The Mac debuted in 1984 to rave reviews but disappointing sales, putting a financial strain on the company -– and fraying Jobs' relationship with Sculley.