I recall back in 1999 when I came across a small Canadian technology company that had developed a unique smartphone with real-time e-mailing. At that time, e-mailing was still largely confined to computers, so I thought this was a novel concept that had growth written all over it. The small Canadian company was Research In Motion Limited (NASDAQ/RIMM), which was started by Jim Balsillie and Mike Lazaridis in a small city in Ontario, Canada.
I initiated coverage on Research In Motion (RIM) at around $5.00 and watched the stock surged to over $140.00 by May 2008, up 2,700%. There was nothing close to RIM’s mobile e-mail technology offered through its “BlackBerry” personal digital assistant (PDA). Corporate users around the world and especially in the U.S. began to coin the PDA the “CrackBerry” due to its addictive qualities for those who needed to stay in constant touch.
But that was then. Over the years, the advent of smartphones has steadily challenged the dominance of the BlackBerry, but the company’s position on top was not challenged until the appearance of the Apple Inc. (NASDAQ/AAPL) “iPhone.” The fateful day for RIM was June 29, 2007.
In nearly five years, the Apple iPhone has leapfrogged ahead of RIM’S BlackBerry to become the most sought-after smartphone in the world, albeit the dominant market is the U.S. In Canada—RIM’s country of origin—the BlackBerry is holding on to its market, mainly with the youths who love the “BBM” instant-messaging feature of the BlackBerry. But Apple did not get to where it is now by being lax and not being aware of any competitive threat. To try to win market share amongst the youth and against the BBM feature, Apple has its own plans to launch a more affordable iPhone that will have its own proprietary instant-messaging service.
While RIM is not yet dead money, it’s pretty close, unless under its new leader, Thorsten Gerhard Heins, the company can come up with both a defensive and offensive answer to Apple and its iPhone and “iPad” tablet. I feel it will be difficult for RIM given the amazing brand consciousness of Apple as a global icon and the must-have smartphone.
Wall Street is not optimistic about RIM as a buying opportunity. The consensus estimate call for revenues to contract 5.20% in fiscal 2012 and another 5.70% in fiscal 2013. Earnings are estimated to decline to $4.15 per diluted share in fiscal 2012 and $2.89 in fiscal 2013. Clearly, the company is contracting and, unless we see a turnaround, RIM will be dead money amid bearish investor sentiment.
The feeling on the Street is that the BlackBerry has lost its momentum to not only Apple, but also to new-generation smartphones employing the “Android” and “Windows” platforms.
The reality is that the BlackBerry no longer has that glamour that it once held. The product is seen as archaic and old. Consumers are dumping their BlackBerry and buying the iPhone and Android phones. Apple has millions waiting anxiously for new products and line-ups for days to buy. RIM draws little excitement and coverage for new products.
As I’ve said before, Apple is indeed the “best of breed.”
Institutions continue to buy Apple in spite of the stock trading at over $500.00, which I discussed in Making the Best Investments: Should You Follow the Pro Money?