Research in Motion has been in the front page of the news for years now. As the manufacturer of the highly sophisticated mobile products in the blackberry line, RIM was able to capture a huge share of the corporate technology market. Focusing on creating secure business communications products, RIM was able to distinguish itself to the point at which it became the sole provider of mobile phones for the Federal Government, the US Military, and sophisticated business representatives around the world.
Regardless of the argument over whether or not the app functionality was there, even the iPhone was not able to match its capabilities. However, RIM has more recently been in the news because of it its plunging share prices, caused by an apathetic North American marketplace. Throughout the course of the next few articles, I’m going to discuss RIM’s current situation as both a doomed tech giant that failed to adapt, and the value opportunity of a life-time. From there, it will be up to you and your advisor to decide how you feel about the company itself.
The big announcement that launched the decline of RIM was that Apple’s IPhone product had managed to do a very good job of capturing the consumer cell phone market, to the point at which RIM was losing a great deal of market share. In fact, the rate of growth of the IPhone as a product suggested that RIM would lose pretty much all of its material presence in North America.
While this proved to be a bit of an exaggeration, the impact on the stock was massive, causing even further flight, and even further decline. It was expected that this represented a trend that would spread internationally, and that RIM was not going to be able to continue competing in the consumer electronics business. Worse yet, there were predictions that even corporate clients were turning to the IPhone, because they favoured its usability over the Blackberry’s technical features.
The next set-back was the near-failure of the Playbook tablet as a product for either consumer or business usage. While the IPad had proven to be wildly successful, the Playbook is still being sold at a steep discount, with very little uptake in the apps market, leaving it with limited functionality.
Combined with the way in which the company released in intermediary phone to bridge the time before the release of its new operating system (a fairly band-aid grade solution), it was argued that RIM had lost its innovative edge. These claims soon became directed at management itself, and the heads of the company began to take some serious criticism for their perceived inability to continue producing cutting-edge products in the same was as Apple was.
The end result has been a share price that has been cut almost into thirds, a management shuffling, and a seemingly desperate attempt to maintain control of the company as its support flounders. However, while the markets continue to crush the stock, many analysts bought into the company as a value opportunity. In the next article, I’ll describe how it is that, even under some extremely stringent valuation assumptions, RIM presents a value-opportunity for the daring investor.
