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sikiliza (< 20)

RIMM a buy at $20 or below

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October 26, 2011 – Comments (1) | RELATED TICKERS: BBRY , AAPL , NOK

RIM has come under fire recently for poor management decision-makng, sub-par products and incredibly inept crisis management skills.

For a while, RIM was regarded as the go-to company for corporate communications needs and the company touted it's well established links with business users. Having nailed down that segment and with no perceptible competitors on the horizon, RIM then sat back, ordered a Pina Colada and promptly went to sleep. It wasn't until recently when the Apple and Android waves threatened to drown the company that it sat up completely dazed and clueless.

RIM has missed the boat on a number of different fronts, pointing to management ineptitude and the kind of carelessness that comes with being an incumbent in a fast moving market:

1. Blackberry Network outtage - it took RIM all of three days to rectify a problem that would take a well oiled technology company hours to deal with. I am not concerned about the complexity or magntude of the problem - you don't leave your customers in the dark for three days. This should never have happened in the first place.

2. I abhor the idea of Co-CEOs especially two that don't see eye to eye. What are the shareholders thinking? Jim Balsillie and Mike Laziridis are two completely different individuals with Jim going down in history along with Steve Ballmer in 2007 as the two idiots that laughed while the iPhone took them down.

3. The Playbook - We all know the story. Further, its failure is compounded by the fact that it is based on the much-touted but probably dead in the water QNX platform.

4. Who walks around their company campus surrounded by bodyguards? Ask Jim Balsillie - signs of the kind of obtuse thinking that comes with reckoning you are better than anyone else.

5. Enterprise segment: Failure to adopt - RIM did not get the memo about companies tightening their belts and rather than buy phones for their employees, asked them to get their own phones and be reimbursed for usage. These days, employees can pretty much get any phone they want. For a company that claims to have been so closely in touch with the business segment, getting overtaken in this way is rather absurd.

6. Yough segment: For a while Blackberry was popular with the youth because of texting. With the advent of Facebook however, the youth can communicate for free, post pictures, share videos with Android and iOS phones. Soon text will be moot - yet another management oversight. 

 

The fundamentals don't brighten the story either:

- Smartphone market share is down year on year and declining fast. Android is actually taking market share directly away from RIM

- Quarterly Revenues are declining at a -3% CAGR

-14% loss in share of subscribers in the last 9 months

-Worldwide phone market share expected to decline to 14% by 2015

 

Despite all this, there is hope in the future but it is predicated on a turnaround in management capabilities, improved product development capabilities and a focus on what makes Blackberry stand apart from its competitors - the Blackberry Network. There's a good number of loyal customers who expect great things from Blackberry and the company has over $2BB on it's balance sheet which could be put to good use in R&D.

The company has an EPS of $5.47 and a PE of 3.82 for a current market price of $20.91. Assuming that its earnings drop further to $5 before a recovery happens, I would gladly pick them up for $20 a share.

 

Disclosure: I do not hold a position in RIMM but will go long if my desired buy price is achieved.

 

 

 

 

1 Comments – Post Your Own

#1) On October 26, 2011 at 6:13 PM, GyroDynasty (98.88) wrote:

I look at the blackberry website and after I press the scroll button to see the next phone I hear myself say "please, please, stop boring me to death, show me a good phone, something that I'll want, anything."  I think this is a bad sign. 

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