Is It Really Game Over For Research In Motion & Blackberry?
June 17 | Posted by Andrew Burchett | Top Story
Research In Motion’s (RIMM) Blackberry used to be the most visible device found in boardroom meetings and business engagements, yet somewhere between the iPhone 1 and the Samsung Galaxy, it fell into the background. The fickle technology sector experiences lead changes more often than a Yankees-Red Sox rivalry game, but Apple has locked itself in with entertainment and casual tech consumers in a way that is impenetrable for competitor’s in the short to mid-term. If RIM wants a way back in to its former glory, it needs to re-position itself again as the leading mobile device of the business world.
No Longer The Go To Machine For Fast Paced Businesspeople
The first decade of the 21st Century may have proven to be the brightest spot for Research In Motion (RIMM), with corporate executives all the way down to entry-level sales people scheduling and planning their business using the then innovative Blackberry machines. However, now Google’s Android devices and the iPhone are becoming the product of choice. RIM’s earnings for Q1 2011 fell from the year before and the company was forced to slash its full year’s earnings forecast, largely due to a failure to maintain market share as Apple charges in. RIM plans to ship 11-12.5 million Blackberry units this year and still has its QNX operating system in the works and set to launch in 2012, but the door is steadily closing on RIM to compete in the corporate sector as it did before. If RIM gets left in the dust, the brand will need to reinvent itself. Don’t look for its PlayBook to topple Apple’s stranglehold (AAPL) on the tablet computer market, but, rather, it should focus its efforts back on its business world appeal. Even with Apple and a host of others eating away at its market share each year, the Blackberry name is still, as of now, the king of brands in the mobile business world and should seek to capitalize on this name.
A Good Buy Now?
Shares in RIM plunged after it announced its lowered earnings forecast in April, with shares being sold off 38% since the day of the announcement. It’s P/E ratio currently sits at 5.57, and most analysts see its equilibrium somewhere around 8 after the new numbers and stock price settle in, so it has room to grow again from its current low. But there may be trouble ahead for the company, as it also announced plans to layoff workers in order to “realign costs to better reflect the competitive environment.” There’s also a plan to buyback 5% of shares, a signal to investors that the company sees the current price as being at an attractive spot. We think all of this means diddly if RIM doesn’t rediscover it’s flair it once had in the business sector. But if the new QNX operating system does indeed prove successful in regaining its name brand aura for corporate types, RIM may be able to salvage a slightly brighter future.
RIM either needs to puts its marketing resources and focus on to the corporate-type consumer and find success in this niche market, or its time to jump ship on the former tech-star. RIM’s marketing strategies will prove vital in keeping this company off life support. Keep a close eye on who it is targeting in its marketing and advertising, and it will be easy to predict whether RIM is going nowhere or will experience a resurgence.
Disclosure: Author, Andrew Burchett of Elite Investment Group, is not long any positions mentioned.
Tags: AAPL, Android, Apple, Earnings, GOOG, Google, Research In Motion, RIMM, Stocks, Value Stocks
