When it comes to technology stocks, Research In Motion Limited (NASDAQ/RIMM; TSX/RIM) has had one of the sharpest declines in recent memory. Research In Motion (RIM) has failed to evolve and innovate against competing technology stocks, and this has meant that in a sector in which tastes change rapidly, RIM’s market share has completely crashed. From what was once a dominant position, RIM is now a marginal player with a low single-digit market share.
The market view has been extremely negative for RIM, as compared to other technology stocks in this sector, but with good reason. Apple Inc. (NASDAQ/AAPL) has gained a massive amount of business, as the firm has consistently produced products that consumers really want. RIM sat back and stopped innovating, leading to this persistent negative market view.
News is emerging just now that Yahoo! Inc. (NASDAQ/YHOO) has just announced that it will no longer support RIM’s “BlackBerry” devices. Now, Yahoo! will pay for its employees’ “iPhones,” “Androids,” or Windows smartphones, but will not for any RIM products. This will continue to hurt the market view for RIM.
With approximately 12,000 employees at Yahoo!, this is a significant policy move. Not only because of the number of employees, but because this firm is one of the technology stocks that is trying to innovate. If Yahoo! can’t see any use for a RIM product, conventional businesses will eventually reach this same decision, and this will further negativity regarding the market view of RIM.
The capabilities of smartphones from technology stocks other than RIM are so much greater than the traditional BlackBerry that I think it will be extremely hard for the company to regain this lost momentum. In situations this difficult, I think the market view should be quite bearish. So far, I have yet to hear of any large corporations shifting their use of an operating system from any of the other technology stocks to a RIM ecosystem. Yet, I hear that many technology stocks are moving away from RIM’s system.
This latest news is in addition to earlier reports that the existing BlackBerry Enterprise Server (BES) infrastructure will not be compatible with the new “BB10” software, which is due for release next spring. Essentially, RIM is forcing all businesses to upgrade their hardware and software to the new BB10 platform. While technology stocks do need companies to upgrade in order to generate revenue, I’m not sure this heavy-handed approach is smart. The market view, as seen by the stock’s performance, certainly isn’t very confident in this strategy.
Companies transitioning to the new operating system will have to run both systems at the same time to manage their networks until they are fully integrated. This might actually push companies to abandon the BlackBerry platform for another; considering the continued level of disappointment over the years by RIM and the increasing demands from employees for other mobile operating systems. This might be a final push. Companies might just say enough is enough and avoid upgrading to the new operating system, driving down the already negative market view even further.
Chart courtesy of www.StockCharts.com
While some technology stocks have recently seen strong performance, RIM is certainly not one of them. Every move up hasn’t been met with heavy selling, as the market view continues to be negative. While the stock might be suitable for short-term trading, I would worry if any move up could be sustained over the long term.
While we won’t know for some time how effective RIM’s new operating system will be in penetrating the market, we do hear constantly about companies dropping RIM as a choice for their employees to use. With other technology stocks moving so far ahead, it might be too little too late. With the market view so negative, it will take significant momentum to turn this ship around.
While my market view regarding technology stocks is positive in general, I would not consider investing in RIM unless market share data starts to show some signs of increase across all segments. If RIM can’t grow its market share against other technology stocks, then there’s no reason to think that the stock price will move substantially higher. Short-term traders might benefit from a quick bounce up, but long-term holders might suffer under the weight of a negative market view and technology stocks that continually grab market share at RIM’s expense.