Worried about RIM part 2
It was just two weeks ago today that I was fussing about the huge Research in Motion advertising GRPs (see prior post “Worried about RIM” Oct 19-09), and what the omnipresent campaign must mean about RIM’s competitive environment. Was an ominus sign I figured. Since that day, the stock is off about C$10 (14%). More to come, it appears.
Technical analysts gave the stock a drubbing last week,. And earlier today, Citibank’s analyst concluded that although the stock was a “buy” last Friday, RIM’s lock on the enterprise market was finally going to crack. This time for real. Time for a “sell” rating.
Over the past decade, RIM’s dominance in the enterprise market was going to be challenged by Palm (think of the Palm 7), Moto’s Q, Nokia’s flavour of the year, and the more recently the iPhone. But that hasn’t stopped RIM’s impressive revenue growth.
That could all change, but we’ve seen this movie before.
If the stock gets much lower, this most recent crisis of confidence will present exactly the same buying opportunity as January 2008, July 2006, March 2005, September 2002, September 2001, May 2001…to name just a few.
MRM
(disclosure – I own RIM)
When Research in Motion (RIM) came out with its first product almost a decade ago, it was a disruptive force within the industry. I am not sure they can replicate that behaviour again now. Apple (APPL)with the iPhone has captured the hearts of many of the same customers. We cannot forget about Google (GOOG) and its Android OS which will be available on about 50 handset by early 2010. Google is working side by side with many hardware manufacturers to ensure Android works on their hardware.
Philip,
It is still too early to tell whether or not Android will make a difference. Two important things to remember:
1) Android has been out for almost a year now (on a couple of relatively well designed handsets) and it has garnered relatively little market share. It may still turn out to be a hit…but it isn’t so far.
2) The smartphone (as opposed to cell phone) industry has not displayed a strong correlation between # of devices and market share. There have been many (many many) different handsets with Windows Mobile yet market share has not followed. And Apple has only two different devices, and is doing incredibly well.
Now the impending Android phones are being well reviewed (but so was the Zune!) and there seems to be more carrier support (especially from Verizon) than last year…but the real success or failure will be determined by consumer uptake and nothing else.
I am actually a fairly big Android fan — but I am also a Linux fan and I have learned my lesson about predicting significant share gains too soon!
DS
Yes, there is good reason to be worried about RIM – but not because their hold on the enterprise is at risk – It’s not, and won’t be for years. Companies investment in BES servers, devices, IT training, end-user comfort/knowledge with the devices, security, etc. are all things that Apple, Palm and Google have a long way to go to replicate. In addition, the technology that carriers around the world have deployed in their networks to support the RIM platform including push capabilities is not something easily or quickly replicated by others.
The problem for RIM is that the immediate growth opportunity for them is the consumer market, and there they are seriously behind. Their software (both operating system and applications) are at least a generation behind Apple, Palm and Google. It is pathetic that a company like Palm, with just a few hundred million dollars, was able to leapfrog RIM on the software side. RIM should never have allowed it to happen, not with the resources that have been available to them for years. It’s a failure of management that it happened and points to other issues that are troubling to the long term prospects of the business.
Do applications (as available through the Apple AppStore) provide the same kind of stickiness on the consumer side that RIM enjoys on the enterprise side? Apple certainly hopes/thinks so ("There’s an app for that"!). If true, then RIM will never catch up (and frankly neither will Palm or Google).
But there is a strong argument to be made that despite the tens of thousands of apps that may be available for a platform, that there are only a handful that matter (email, calendaring, web browser, contacts, instant messaging, Facebook, Twitter, and a few others), and if that suite is great, then the rest don’t matter (or matter less). If you buy into that argument, then RIM can catch up – they just need to spend money, which they have a lot of.
Finally, remember that there has historically been little stickiness in the consumer space. Motorola was the hot phone, then Nokia was, now it’s Apple or maybe Palm or maybe Android. When RIM captures an enterprise customer, they have that customer through many devices. When Apple, RIM, Palm or Motorola/Google captures a consumer, they have them for at best 3 years, and then that customer is back up for grabs.