[xandermac]

Research in Motion (RIMM) stock has been holding on to current levels in the middle of this market decline. Does this mean investors or traders know something about the company that is not obvious? No, it means they still use Blackberries instead of iPhones and have no sense of tech history.

Simply put, Research in Motion is a dead company.

Research in Motion is all about the Blackberry – basically a single product drives the company. The Blackberry competes against the iPhone, and the Android phone ecosystem with its many different hardware suppliers. It also competes against second tier smart phones such as Nokia (NOK) and other Windows based phones. There is only room for two players – the Apple (AAPL) /iPhone and the Android universe. The other players are living at the margin of the market, their share is stagnant or declining and they have no hope of competing against Apple and the Android.

Do I exaggerate?

Apple’s revenues last quarter were $39 billion; Google’s (GOOG) were ten and a half billion. If you are delusional and believe a Windows smart phone has a prayer in this market, Microsoft (MSFT) had $17.4 billion in revenue. Research in Motion’s revenue? $4.2 billion, down 19% from the same quarter last year. In the smart phone market, it is all about the ability to develop new products and refresh your operating system and ecosystem. With operating margins generated by revenue. That is happening with iPhone and Android phones; it is sort of happening, in a more limited way, with Windows phones; it is not with the Blackberry.

And it is only going to get worse. A recent (April 12, 2012) survey by ChangeWave Research, a division of the 451 Group, showed future buyers of smart phones were disposed to buy as follows:

56% Apple iPhone
22% Samsung (SSNLF.PK) /Motorola /HTC Android phones
3% Blackberry

Pretty much says it all. Well, there is more from the same survey. When current owners of a smart phone were asked if they were “very satisfied” with their smart phones, 75% of iPhone users said yes. How many said yes who owned Blackberries? 24%. Whoops.

A couple of weeks back Research in Motion announced the Blackberry ten – and botched the announcement. The ship date? Some time in the fall, not exactly precise. The features? Nothing special. The market reaction? A sell off in the stock.

Part of the sell off was the undue expectation RIMM was gong to pull off a miracle. The other was the based on clear-eyed investors looking at reality. Without compelling features, the new Blackberries will not attract the developers needed to create apps that make the phone more appealing than an iPhone or Android phone. As with personal computers, the success of phones is the software – the ergonomics, the interface, and the apps. Even Steve Jobs admitted the Mac – and therefore Apple as a company – was probably saved by the deal with Microsoft that insured Microsoft Office would be available on the Mac.

That is the marketplace review? Dead and getting deader. What about a company view?

A week or so ago the company announced new management, Kristian Tear to become the new Chief Operating Officer and Frank Boulben to become Chief Marketing Officer. Tear comes from industry powerhouse Sony Mobile Communications, where he was an executive VP. Anybody out there own a Sony phone? I thought so. Boulben was EVP of Strategy, Marketing and Sales for LightSquared. That crackerjack outfit went bankrupt yesterday. The new management team’s resume is not encouraging.

Five years ago the company may have been fine – Research in Motion’s primary market was the business user with some help and revenue from consumers – and the ecosystem and apps those consumers wanted mattered far less. Everything has flip flopped – consumer behavior is pushing iPhones and Android phones into corporate America and displacing Blackberries, in part because of phones and in part because of tablets. Yes, tablets.

ChangeWave surveys show the iPad with an incredible 86% share among those planning a tablet purchase. More relevant to RIMM, 18% of corporate IT departments surveyed said they are now providing tablets to their employees, up from 4% less than two years ago. And where iPads go, iPhones follow. The iPad is leading to a rapid erosion of market share for Blackberries in their core market, business.

They saw this and managed to develop one of the worst tech products of this century. Their foray into tablets was a disaster, a product pulled from the marketplace at the cost of a billion dollar write down. The result is that Research in Motion currently lacks a product to counter the iPad and the accelerating trend towards tablet usage among businesses.

Lousy and dying products; unproven management; ferocious competitors eating into its installed base and the heart of its market presence. OK, the company is in deep yogurt. What about the stock? The three year, one year and one month charts all say the same thing – a ruinous decline for shareholders.

Why is anyone buying the stock if those survey results are accurate – and they are – what is the market missing?

First, RIMM is a very big and popular name, in part-- and I am not joking about this-- most analysts still use Blackberries. I did research that was sold to analysts and traders on Wall Street for six years and I was shocked, then amused, at how parochial these guys and gals can be. I vividly remember the hedge fund type saying the Mac was a toy and ignored the ChangeWave Research survey results about the iPod. The stock was at $30 at the time.

Second, there is a belief some dumb company will buy Research in Motion at a premium to the current price. I do believe some dumb company will buy it at a much lower price, similar to the ridiculous purchase a few years back of Palm by Hewlett Packard (HPQ) . Do you remember Palm and the Palm Pilot? They are buried right next to the plot being readied for the Blackberry and Research in Motion.

What about the Canadian government? Yes, they like their corporate champions up there – we do too, regardless of the rhetoric on Capitol Hill – but Research in Motion is not an employer with unions to lobby the government and have an impact on elections. The Canadian government might make some noise about an acquisition but it is hard to see them directly helping the company when it runs into financial trouble.

Editorial note: Nokia, another victim of Apple and the Android and bad management decisions is almost as dead as RIMM but the Finnish government will never let Nokia die. And that stock is already down into the very low single digits, not much to be gained by shorting it.

How low can that stock price go? I think RIMM has no fundamental value other than its cash – harsh, but there it is. I am guessing the fair value of an acquisition, if made within the next six months, would be around $2, for patents and customer base and so on, and that would mean the company buying it would pay $4-$5. That price point is a long way to go from current levels.

One last objection - RIMM is a well known short candidate. That is true - but short interest is decreasing and days to cover is only 2.2, a great sign for those of you looking for an entry point for a short position and patient enough to watch the RIMM’s march to the tech cemetery.

Disclosure: I have not and will not short RIMM in any fashion, including puts, and I have an open recommendation to buy puts on the stock in my service Michael Shulman’s Short Side Trader.


Research In Motion: Going, Going... Sure To Be Gone - Seeking Alpha

[simu31]

From the sixth line, the "commentator" is talking crap.

Then I got to the line: "Research in Motion is all about the Blackberry – basically a single product..." which is in and of itself wrong, and almost gave up, but persisted a little.

The line which is just ignorant was: "In the smart phone market, it is all about the ability to develop new products and refresh your operating system and ecosystem.... That is happening with iPhone and Android phones; it is sort of happening, in a more limited way, with Windows phones; it is not with the Blackberry."

The man has obviously never seen a Windows Phone (it is far more impressive in my view than Android) and apparently slept through the first week of May when BB10 was announced and shown.

It's more than obvious he has NO IDEA what he's talking about so it's not worth my, or anyone else's, time reading his drivel

Si.

[OzarkaTexile]

From the sixth line, the "commentator" is talking crap.

Then I got to the line: "Research in Motion is all about the Blackberry � basically a single product..." which is in and of itself wrong, and almost gave up, but persisted a little.
Si.

RIM's website disagrees: Research In Motion - Products

If the revenue from BlackBerry went away, so would RIM.

[morlock_man]

Wow.

That guy really doesn't like RIM long at all.

[manofice1]

ZZZZZZZZZzzzzzzzzzzzzzzz............

[lnichols]

Last week they were positive on RIM, this week negative. Wasn't RIM suposed to be dead by now according to most of these sites and the RIM haters on this forum?

[cgk]

Last week they were positive on RIM, this week negative.

There isn't a "they" - it's not an editorial piece but an analyst commentary - you often see people at seeking Alpha taking widely different positions*.


* However when the other guy at SA was saying nice things, people here were saying what a great site SA was.

Having said that, I'm surprised by this aspect of his commentary:

Pretty much says it all. Well, there is more from the same survey. When current owners of a smart phone were asked if they were “very satisfied” with their smart phones, 75% of iPhone users said yes. How many said yes who owned Blackberries? 24%. Whoops.

Without seeing the methodology I can't comment on the accuracy but if it's about right that must be a concern.

[wafguy]

Research In Motion: Going, Going... Sure To Be Gone - Seeking Alpha

To save people the time and effort of reading this, here's the executive summary:

1) RIM market share has shrunk dramatically in the US, therefore their market share will shrink to zero in all markets. (Actually I'm assuming this, since he doesn't seem to consider any non-US market.)

2) There is no possible product RIM could make that would reverse this trend. The BB10 announcement was botched and the new OS won't have the 'features' needed to attract developers.

3) RIM's worth $2/share

Also of note is his disclosure:

"Disclosure: I have not and will not short RIMM in any fashion, including puts, and I have an open recommendation to buy puts on the stock in my service Michael Shulman�s Short Side Trader."

This translates roughly to "I have no direct financial interest in RIM going down the toilet but I do have considerable professional and reputational interest in seeing it happen. Now please excuse me while I flush."

Hope this was useful.

[cgk]

1) RIM market share has shrunk dramatically in the US, therefore their market share will shrink to zero in all markets. (Actually I'm assuming this, since he doesn't seem to consider any non-US market.)

I think what analysts are interested in at the moment (because there is no BB10 revenue stream and we have no real idea what it will be or even when) is what is the next quarter going to bring in term of margins/profits and in terms of what element of BB7 sales are made up of high margin items and what is made of low-margin curves? If RIM continue to lose share at the top-end of the market (which is where all the profit is) then that has implications for the company.

[pkcable]

Seriously WHAT is the fasination with posting negative articles about RIM that some folks around here seem to have? OOOO some obsure journal put out another negative piece about RIM let me run and post it on crackberry, so maybe I can be flamed!

[_StephenBB81]

Seriously WHAT is the fasination with posting negative articles about RIM that some folks around here seem to have? OOOO some obsure journal put out another negative piece about RIM let me run and post it on crackberry, so maybe I can be flamed!

Notice the posters who do so,

They have a negative slant to all things RIM

[morlock_man]

He's also hawking his book, Sell Short.

[ptpete]

I'm buying shares today. Held off last week but now looks good. Not ambitious, but nice price.

[cgk]

I'm buying shares today. Held off last week but now looks good. Not ambitious, but nice price.

I really thought they had bottomed out at $12, at 11.36 and falling shows how much I know about stocks and shares!

[pkcable]

Notice the posters who do so,

They have a negative slant to all things RIM

Want to know that saddest part? The OP pretty much wrote the book on hacking your service books, and fixing issues related to service books. He was such a strong contributer, and good person, still not sure what happened.

[ptpete]

Well if it goes to 12 by the end of the week, that's a 6% change, which is not that much given it's recent volatility.

There is a dearth of news post Jam, but the that's cuz developers are to busy playing with new tools. We are crossing the desert. Check your water supply.

[wafguy]

I think what analysts are interested in at the moment (because there is no BB10 revenue stream and we have no real idea what it will be or even when) is what is the next quarter going to bring in term of margins/profits and in terms of what element of BB7 sales are made up of high margin items and what is made of low-margin curves? If RIM continue to lose share at the top-end of the market (which is where all the profit is) then that has implications for the company.

Sure, thats what analysts are after, but this guy isn't a real analyst, he seems like more of a used car salesman. It'll be funny to see how analysts do without the benefit of guidance to tell them the answer in advance though.

Anyway, next quarters results will have huge short-term impact on the stock, but, unless there's some sort of buyout or merger, zero long term impact. The value of the stock will be tied directly to the success/failure of BB10 and any other meaningful future business decisions they make. The success/failure of BB7 over the next few months will only determine the extent of the short-term downside.

[cgk]

I wouldn't disagree with any of that - I think the real crunch comes if BB10 isn't a success* straight out of the gate, when are we going to get first indicators? Q1 2013?

* what a success looks like I'm not sure but the market will tell us.

[lnichols]

Notice the posters who do so,

They have a negative slant to all things RIM

+1000000 Same group of people posting negative stuff all over Crackberry, including negative article links.

[OzarkaTexile]

Sure, thats what analysts are after, but this guy isn't a real analyst, he seems like more of a used car salesman. It'll be funny to see how analysts do without the benefit of guidance to tell them the answer in advance though.

Anyway, next quarters results will have huge short-term impact on the stock, but, unless there's some sort of buyout or merger, zero long term impact. The value of the stock will be tied directly to the success/failure of BB10 and any other meaningful future business decisions they make. The success/failure of BB7 over the next few months will only determine the extent of the short-term downside.

Thank you. I totally agree with this statement. Nothing RIM does in Africa or the automotive market or with legacy BB7 devices matters. If BB10 is successful, stock will go up, and RIM will survive. If BB10 is not successful, I doubt they'll have time for another chance.

The question is what will be considered a success and how long do they have to make it a success.

[_StephenBB81]

Want to know that saddest part? The OP pretty much wrote the book on hacking your service books, and fixing issues related to service books. He was such a strong contributer, and good person, still not sure what happened.

Oh I am well aware, he was the hardest trigger I pulled.

[wafguy]

The question is what will be considered a success and how long do they have to make it a success.

Yep. That is 100% the question. This will determine the extent and timing of any upside.

[cgk]

Yep. That is 100% the question. This will determine the extent and timing of any upside.

OK - so can we take a stab at giving a broad criteria for what success means in a BB10 context?

If they sold one million bb10 devices in the first full quarter they were on sale, would you consider that a success? Do you think the market would?

[_StephenBB81]

OK - so can we take a stab at giving a broad criteria for what success means in a BB10 context?

If they sold one million bb10 devices in the first full quarter they were on sale, would you consider that a success? Do you think the market would?

That would depend on where the 1 Million devices sold
and How many BB7 devices also sold.

IF RIM sold 1Million devices with a 100% pull through into the US market while maintaining their BB7 shipment volumes into the same market, then YES I would consider the product a success because those are 1 Million new users of the new platform and the old one didn't die off. BUT the second quarter results better see a drastic shift.

if BB10 launches globally and only 1 Million units are sold, then it wouldn't be a success. I would say for me to feel BB10 is a success I would need to see 2 consecutive volume growth quarters of over all shipments with the percentage of growth increasingly BB10 based.

[wafguy]

OK - so can we take a stab at giving a broad criteria for what success means in a BB10 context?

If they sold one million bb10 devices in the first full quarter they were on sale, would you consider that a success? Do you think the market would?

Within a couple quarters they need to be exceeding their previous high point of sales (14 million/quarter or so, IIRC) and growing sales at the rate they used to. Within a year they need to be growing their US market share against Android/iOS. I think this is the minimum required to drive robust stock growth. Short of this, they can still be "a success" and save the company, but I'm not sure the stock will do much. This reduced level of success will bump it up above the current lows (to say $20-30s) but it won't reach the old heights of 2008/2009.

There you have it. Another worthless stock prediction on the Internet.