Time To Buy Research In Motion (RIMM)?
The rise and fall of Research In Motion (RIMM) is a fascinating bit of modern Wall Street lore.
Just a few years ago, the company’s iconic BlackBerry device was THE must-own communications gadget. And for good reason. It was the first commercially popular hand-held device to combine the cell phone, PDA features, and wireless email capabilities.
Everyone from business people to soccer moms had one.
The amazing device was so popular it had even developed a cult-like following. And it was affectionately referred to as “CrackBerry” by loyal users who couldn’t put them down.
Thanks to the BlackBerry’s widespread popularity, RIMM was making money hand over fist.
By late-2007, just eight years after the BlackBerry’s initial launch, RIMM had over nine million subscribers. And they were adding a million subscribers every three months.
In addition, the company had over a billion dollars in revenue coming in every quarter. And RIMM sported a market cap of over $40 billion with a stock price north of $100 per share.
But, oh how the mighty have fallen…
After hitting an all time high of $148.13 per share in June 2008, RIMM plunged 96% over the next four-plus years. This past September, the stock hit a low of $6.22, a level last seen in September 2003. And the company’s market cap had been reduced to a mere $3.2 billion.
What happened?
Simply stated… the Apple iPhone.
Apple introduced the iPhone in January 2007. The iPhone’s attractive hardware, easy-to-use touchscreen, intuitive software, and growing ecosystem of mobile apps took the world by storm.
And the smartphone revolution left RIMM in the dust.
Google put further pressure on RIMM in 2008 when it introduced its Android operating system for smartphones. Google made its operating system’s code open-source. As a result, it took just two years for Android to become the leading smartphone platform in the world.
Of course, RIMM’s fall didn’t happen overnight.
RIMM introduced its first smartphone, the BlackBerry Bold 9000, in November 2008. But it had software issues and compatibility problems with AT&T’s 3G network which hurt sales.
The BlackBerry Bold was quickly followed by the more popular BlackBerry Storm. It was the company’s first keyboard-less, touchscreen device. However, it too had problems. The device lacked WiFi and suffered from slow, glitch-plagued software.
Still, in 2009 RIMM maintained decent market share and was dubbed the fastest growing company in the world by Fortune magazine.
But the writing was on the wall…
The company was hampered by a fundamental problem. It was tied to an aging operating system that was quickly becoming obsolete. Apple’s iOS and Google’s Android were rapidly gaining market share in the fast-growing smartphone space.
And it wouldn’t be long before BlackBerry was reduced to near irrelevancy.
According to IDC, Android’s share of the smartphone market has climbed to a stunning 75%. And Apple’s iOS is in second place with a respectable 15%.
But BlackBerry’s share has plummeted… it’s dropped from 9.5% a year ago to just 4.3% today.
It’s no wonder RIMM shares have fallen so far so fast.
However, RIMM may be on the cusp of a new beginning.
Bloomberg reported this morning that RIMM plans to showcase the first two of its new line of BlackBerry smartphones very soon. On January 30, 2013, the company will provide details on the price and release date for its new devices.
Here’s the key…
The new smartphones feature a brand new, proprietary operating system dubbed BlackBerry 10. It’s based on QNX, which RIMM acquired when it purchased QNX Software Systems in April 2010.
BlackBerry 10 will finally give RIMM an opportunity to compete with Apple and Google in the smartphone market.
It’s an open-source platform like Android so it holds promise for rapid market share gains. And it has already been made available to developers who are working feverishly to create a new ecosystem of apps and content to run on the devices.
Of course, RIMM is way behind Apple and Google at this point. It remains to be seen if BlackBerry 10 can catch on with consumers sufficiently to make inroads into the leaders’ market share.
However, with RIMM trading at nine-year lows, it may be ripe for a rally going into the January 2013 unveiling.
Profitably Yours,
Robert Morris
Category: Stocks
