BlackBerry maker Research In Motion (NASDAQ:RIMM) plumbed its 52-week low last Monday. But thanks to better-than-expected earnings and an upgrade, RIMM added more than 15% through today’s opening bell.
So is RIMM stock making a comeback?
All right, all right, I’ll let the laughter die down before continuing.
Who honestly believes in the long-term viability of BlackBerry smartphones or the forgettable PlayBook tablet? And who is longer than a few weeks tops in RIMM stock?
Consider that Apple (NASDAQ:AAPL) sold 5 million units of the iPhone 5 in its first weekend alone. And while Apple has the margins and user experience locked up, Google (NASDAQ:GOOG) is the clear leader in market share with its open-source Android OS in almost 7 of 10 smartphones globally.
Research In Motion and its BlackBerry platform? It’s in third place and moving phones like molasses … with less than 5% global market share. And if you add up legacy Symbian-powered phones from Nokia (NYSE:NOK) and the Microsoft (NASDAQ:MSFT) Windows phone OS together — the two joined forces in early 2011 — then Research In Motion gets bumped off the podium altogether.
Come on: Who do you know that uses a BlackBerry? Of those that do, have they ever used an iPhone or slick Android phone and not felt like they are missing out?
I’ll tell you who uses BlackBerry phones: my dad. He gives the typical BlackBerry endorsement: that he couldn’t live without a QWERTY keyboard.
Think this touch-vs.-tactile thing is overblown? I don’t. It speaks volumes for the archetype of BlackBerry users.
I love my father, but this is a guy who types with two fingers on his laptop, still makes drawings pixel-by-pixel in MS Paint, and for years while I was growing up, paid for both AOL (NYSE:AOL) and high-speed Internet because he didn’t want to figure out another way to use email. If AOL hadn’t made AIM and e-mail free, he still would be paying them a monthly fee.
In short, BlackBerry is the past … not the future. In a post-PC age, it is clinging to the PC keyboard, and it’s fair to read as much as you want into that fact.
OK, philosophical rant over. Let’s get to the meat:
Sure, RIM shares popped on better-than-expected earnings that included stronger sales than forecast, with a surprise rise in subscribers. But in regards to the bottom line, it was simply less bad — a loss of 27 cents as opposed to 47 cents. A much smaller shortfall to be sure, but still a company deeply in the red. RIM execs said the company will lose money every quarter in fiscal 2013. And it is projected to post an annual loss again in fiscal 2014. Revenue is caught in a downdraft ,too.
Research In Motion also had to address concerns about yet another network outage that, if it were to happen again, could obliterate confidence in the tech company. Make fun of the new Apple iPhone maps app all you want, but at least the entire phone doesn’t stop working properly.
There’s also the issue of Playbook selling a mere 130,000 units last quarter. Last quarter apple sold 17 million iPads. Amazon (NASDAQ:AMZN) is notoriously tight-lipped about the Kindle, but all experts calculated it selling easily north of a million units quarterly and perhaps selling as many as 7 million quarterly before this new Kindle Fire HD launch. Then there’s Samsung, unloading more than 2 million Galaxy tabs last quarter. The numbers speak for themselves.
Oh yeah, and a whopping 45 of the 47 brokerage firms following RIMM stock rate the shares a “hold” or worse, compared to just two “buy” ratings. There was an upgrade from Scotia Capital last week … but that was simply from underperform to sector perform.
And let’s not overlook the rather embarrassing cover of “Keep on Loving You,” where RIMM employees serenade developers, going viral – in a bad way. This is a company that looks desperate, not a company that you want to invest in.
What’s the compelling reason to believe in RIMM stock? Do you really think the BB 10 OS will be good enough to contend with Apple and Google, or just good enough to slow the bleeding? Do you really think the brand hasn’t suffered irreparable harm — akin to Kodak (PINK:EKDKQ), which once was an iconic name but eventually became synonymous with analog technology in a digital age?
Yes, the company has almost $2 billion in cash and short-term investments. But what can it acquire to fill in the gaps?
The PlayBook is doomed to fail. And while the BlackBerry remains viable for the short-term thanks to a new line of phones set for January release to a loyal core of BlackBerry users, it’s hard to believe the new line of RIM devices will go toe-to-toe with Android- and Apple-powered gadgets.
And even if they do? Well, if you take that huge leap of faith, that would only catch up Research In Motion on the technology side. It’s impossible for anyone who has followed the tech industry to ignore the cold reality that BlackBerry devices do not have “sex appeal” with consumers.
In short, the RIMM stock pop seems to be a short squeeze and a momentum shift based on the idea that this company might not go bankrupt as soon as some bears thought.
Trust me, BlackBerry and RIM will go the way of Palm eventually. They won’t go bankrupt this year or even next year. But it’s only a matter of time before this company disappears forever.
- In the interest of balance, the case for switching to a BB 10 device (CNET)
- A little tech blog you may have heard of says the RIM release might be too little too late (Wired)
- Paul La Monica channels a great Monty Python sketch in his smackdown of RIM (CNN Money’s The Buzz)
- An analyst is quoted as saying, “… in the long term I don’t think that you consider this a turnaround play yet from a stock point of view or even a value play.” Word. (CNBC)
Jeff Reeves used to suffer the painful experience of a BlackBerry World Edition until his generous employer bought him an iPhone 4 a year or so ago. It changed his life.
Jeff is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he owned a long position in Apple but no other stocks here.
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