RIM Has Reached DEFCON Denial
The dire situation at Research in Motion (NASDAQ:RIMM) has reached DEFCON Denial. The BlackBerry maker, which was once valued at $80 billion in its prime, now has a market cap of nearly $4 billion. The company failed to innovate and keep their competitive advantage against tech giants such as Apple Inc. (NASDAQ:AAPL) and Google Inc. (NASDAQ:GOOG) over recent years. As a result, customers left at alarming rates and now RIM is reduced to denying death spiral reports and lobbing up a hail mary pass for survival.
The latest downturn for Research in Motion began last week, when the company reported a loss of $192 million (37 cents per share) for the first-quarter, compared to a net gain of almost $700 million a year earlier. Revenue also crashed 43 percent to $2.81 billion, below estimates of $3.10 billion. Shares plunged 19 percent in a single-day on the news, but investors should be even more concerned about the company’s response to the matter.
The first stage of loss and grief is denial, a stage currently being experienced by executives at Research in Motion. Earlier this week, chief executive Thorsten Heins told a Canadian radio station that he didn’t believe RIM was in a “death spiral” and that “there’s nothing wrong with the company as it exists right now.” He added that he was not ignoring threats. “Yes, it is very, very challenged at the moment — specifically in the U.S. market. The way I would describe it: we’re in the middle of a transition.” However, the same problem remains, it is simply running out of time to become innovative, given the current and future competition in the pipeline.
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If RIM is only in the middle of a transition, it may already be too late. In addition to cutting 5,000 jobs, the company announced during its earnings release that it postponed the launch of its new BlackBerry 10 smartphone until the first-quarter of next year. The device has already been delayed several times before and is seen as the company’s hail mary pass at survival.
The leaked image above from BlackBerryOS.com shows that RIM does appear to have a roadmap in place for new BlackBerry 10 devices. A 4G PlayBook is slated for later this year, while two new smartphones may be released in the first-quarter of 2013. One device appears to have the well-known BlackBerry keyboard, while the other is completely touchscreen. A 10-inch PlayBook code named “Blackforest” is slated for a third-quarter 2013 release. While the leaked graphic provides some excitement and hope for RIM, investors should keep in mind that by the time the new devices are released, we are very likely to already have a new iPhone and iPad Mini from Apple on the market. Furthermore, Microsoft Corp. (NASDAQ:MSFT) is expected to release their new Windows 8 phone with Nokia (NYSE:NOK) later this year, along with Microsoft’s first tablet attempt, the Surface.
After plummeting from a price of $140 to only $8 in a span of 4 years, it may seem like the end of the road for RIM shares, but some analysts believe a takeover or strategic partnership could be in the works for the company. Last month, JMP Securities upgraded the stock to Market Perform from Market Underperform. Analyst Alex Gauna explained, “We’re just pointing out very simply that the company has put out M&A as a strategic option for itself and it’s hired financial advisers, and that could lead to a sort of pop or valuation rally later this summer.”
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