Research in Motion Bulls are Delusional Investors
Research in Motion (NASDAQ:RIMM) is a textbook slow-motion car crash. The company has simply missed the beat on every meaningful development in the new frontiers of smartphones and tablets. Despite the glaringly obvious, old faithful investors continue to ignore reality and Research in Motion CEO Jim Balsillie.
RIMM Doesn’t Have the Necessary Catalysts for Stock Appreciation
Although RIMM realism is widespread, yesterday I saw several prominent media outlets featuring “contrarian” (in this case ‘idiotic’) stories from CFAs and Wall Street analysts who believed pessimism for RIMM was “overdone.” Really? How can negativity be overdone for a company with no positive business catalysts?
Our Wall St. Cheat Sheet investment framework explains that positive catalysts are a critical component to stock appreciation. In the case of Research in Motion, we see a company several product cycles behind smartphone leaders Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG). Those are formidable competitors who won’t pause to let RIMM catch up. On the tablet side, RIMM’s Playbook has been nothing short of a spectacular disaster. First, Playbook was brought to market long after iPad and other top selling tablets. To be exact, Playbook finally hit retail outlets at the end of April. Yup, this April. So much for a catalyst — more like a Johnny Come Lately.
As if things weren’t bad enough for the Blackberry brand, during yesterday’s earnings RIMM CEO Jim Balsillie said “The challenges of the first quarter are continuing into the August quarter.” Read: sell our stock because we’re having problems. Balsillie then drilled down to reveal an incredibly serious problem on the horizon: “The existing portfolio of BlackBerry products has been in the market for close to a year, and delivering new products has proven more challenging than anticipated.” That means the company is fumbling all over the field and is NOT in a production mode to match Google or Apple. Again, this is another strong sign the company is still mid car crash.
What are Some Solutions for Blackberry?
In March I said Blackberry should pivot and go with Android as their mobile OS. Now, I double-down on that free advice. Unfortunately, RIMM is heads down full-speed-ahead burning money on a new software platform based on the QNX operating system. WHY? WHY? WHY? Cut your losses in software and focus like a Shaolin Monk on creating the best available hardware for Andoid acolytes. That’s the best of all possible worlds: a viral Android user-base marrying a world-class hardware developer.
It’s time for the big egos in the C-Suite to let go of the Crackberry glory days and realize the empire is in serious jeopardy. Investors have confirmed that truth today by sending RIMM shares to levels not seen since 2006. Of course, RIMM’s stock can rally here and there. But the long term trend will continue down so long as management rides the coattails of a groundbreaking texting phone with email capabilities that was unparalleled …. 5 years ago.