{"id":35631,"date":"2013-01-22T11:54:35","date_gmt":"2013-01-22T16:54:35","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35631"},"modified":"2013-01-22T11:54:36","modified_gmt":"2013-01-22T16:54:36","slug":"blackberry-10-will-not-save-rimm","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/22\/blackberry-10-will-not-save-rimm\/","title":{"rendered":"BlackBerry 10 Will Not Save RIMM"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

With a little more than a week to go before BB10 hits the stores, Research in Motion (Nasdaq:$<\/span>RIMM<\/a>) <\/b>has become a hot stock again.\u00a0 The company that invented the smartphone may be reestablishing itself as a major player in mobile.\u00a0 Or, we could be watching the biggest dead-cat bounce in history.<\/p>\n

\"RIMM\"<\/a><\/p>\n

As recently as this past September, RIMM was left for dead, trading for barely $6 per share.\u00a0 As this article is going to press, it has nearly tripled from those levels.\u00a0 A rally that large and over that long a stretch cannot be dismissed as short covering.\u00a0 Clearly, a lot of investors believe that the BlackBerry is making a comeback.<\/p>\n

We\u2019ll see about that.<\/p>\n

If you\u2019re a nimble trader with a short time horizon, RIMM might be worth a gamble.\u00a0 Given the current level of speculation in the stock, there should be some great trading opportunities over the next few weeks, long and short.<\/p>\n

But if you\u2019re an investor with a longer time horizon, you should view the rally in RIMM\u2019s shares with a healthy dose of skepticism.\u00a0 RIMM is not Apple (Nasdaq: $<\/span>AAPL<\/a>), Google (Nasdaq:$<\/span>GOOG<\/a>) <\/b>or Microsoft (Nasdaq:$<\/span>MSFT<\/a>)<\/b>.\u00a0 \u00a0\u00a0Any of these tech giants can afford to make a colossal mistake or two or to have a new product bomb.\u00a0 Microsoft and Google have both proven this; with the exception of the Android operating system, neither company has come out with a hit product in years, yet both continue to generate gobs of cash.\u00a0 Even the infallible Apple had its Maps public relations disaster last year, yet it hardly slowed the company down (stock price crater aside).<\/p>\n

But RIMM?\u00a0 For the erstwhile mobile leader, BB10 is do or die.<\/b>\u00a0 If the operating system fails to inspire consumers, then the company is finished.\u00a0 This is a binary set of outcomes.\u00a0 Either BB10 is a hit, and RIMM matters again, or it is a bomb and it is time to sell off the company\u2019s assets and close up shop.\u00a0 Given the competitiveness of the smartphone race, no prudent investor would make that bet.<\/p>\n

Let\u2019s pick apart some of the bullish arguments.<\/p>\n

RIMM\u2019s messaging and secure email system is a competitive advantage that keeps customers\u2014and particularly enterprises\u2014loyal<\/strong>.\u00a0 Wrong.\u00a0 I used to think I would miss my BlackBerry messenger and inbox\u2026right up until I bought an Android.
\n<\/b><\/p>\n

But beyond this, one anecdotal bit of news late last year made me realize that BlackBerry was finished.\u00a0 Fannie Mae\u2014the quintessential enterprise customer with overzealous security requirements\u2014was allowing their portfolio managers to turn in their company-issued BlackBerries and instead access their company email via their own iPhones and Androids using a custom app.<\/p>\n

I had been skeptical that the \u201cbring your own device\u201d trend would ever expand beyond small businesses.\u00a0 Big business and government would never tolerate the loss of control or security risks.\u00a0 Well, never say never.\u00a0 When government-sponsored entities allow it, it\u2019s hard to imagine who won\u2019t.<\/p>\n<\/p>\n

BB10\u2019s new features are a \u201cgame changer.\u201d <\/b>Really?\u00a0 Because everything I see looks a lot like something I\u2019ve seen somewhere else.\u00a0 The new BlackBerry Messenger (BBM) has voice calling, so you can call friends internationally from wifi or your data plan and not use mobile minute.<\/p>\n

It seems like I\u2019ve seen this before.\u00a0 Oh yeah, it\u2019s called Skype, and it\u2019s already available on every other mobile platform except<\/i> the BlackBerry.<\/p>\n

Rumor has it that BB10 has the fastest browser.\u00a0 Ok.\u00a0 For lack of better information at the moment, I\u2019ll concede that point.\u00a0 But given that mobile devices tend to be app-driven and not browser-driven, that\u2019s a small victory at best.<\/p>\n

Rumor also has it that BB10 will have the best auto-correct and word prediction, which are valid selling points for a touchscreen phone.\u00a0 But will that compel a customer to choose a BlackBerry over the newest, snazziest Samsung Galaxy?\u00a0 I\u2019m thinking no.<\/p>\n

There is huge pent-up demand for the BB10 after months of delays.\u00a0 <\/b>This is laughable.\u00a0 Yes, plenty of current BlackBerry users will upgrade.\u00a0 But given the poor experience with the brand in recent years, I don\u2019t see too many former users who defected to the iPhone or Android going back.\u00a0 They\u2019ve moved on, and whatever they found appealing about the BlackBerry ecosystem in the past\u2014such as BBM, which is still the best texting program out there\u2014they have found they can live without.<\/p>\n

A related issue here is cost. \u00a0\u00a0I was poking around the T-Mobile store a few weeks ago (shopping for a Windows phone, incidentally) when I picked up the current generation BlackBerry Bold.\u00a0 Buying it outside of contract, it costs over $600.<\/p>\n

Seriously?\u00a0 \u00a0$600\u2026for the old, clunky non-BB10 edition?\u00a0 What will a new one cost? For consumers to give BB10 a chance, it will have to be aggressively subsidized and pushed by the carriers.\u00a0 Will they?\u00a0 All major carriers have pledged \u201csupport.\u201d\u00a0 We\u2019ll see what that means in practice.<\/p>\n

RIMM\u2019s share price is soaring today on comments from CEO Thorsten Heins that the company\u2019s strategic review could include selling off its hardware production or licensing its software.\u00a0 I argued a year ago that RIMM could have a bright future as a services company by building on Mobile Fusion.\u00a0 It could essential follow the path of IBM and become a high-end services company rather than a gadget maker.<\/p>\n

But a year later, it\u2019s still nothing more than speculation. And with RIMM no longer dictating terms, carriers have started to push back on the licensing fees for BlackBerry Internet Service and Enterprise Server.<\/p>\n

And who, pray tell, would buy RIMM\u2019s hardware business?\u00a0 Or more importantly, license BB10 as a manufacturer?\u00a0 Samsung?\u00a0 Nokia?\u00a0 Probably not; both have made large commitments to Android and Windows.<\/p>\n

RIMM doesn\u2019t have a lot of time.\u00a0 It\u2019s bleeding cash, and it isn\u2019t expected to turn a profit this year.\u00a0 For RIMM, BB10 must be a rip-roaring success.\u00a0 Failure means irrelevance and death.<\/p>\n

And let\u2019s not forget one last point.\u00a0 RIMM is not really competing with Apple or Google right now.\u00a0 It\u2019s competing with Microsoft to be the third platform.<\/p>\n

It is in everyone\u2019s best interest to avoid an Apple-Google duopoly.\u00a0 Consumers, manufacturers, and carriers all stand to benefit from more competition.\u00a0 But I\u2019m betting that it is Microsoft that pushes its way in, not Research in Motion.\u00a0 Microsoft is starting with a clean slate and a fine operating system that any manufacturer can license.\u00a0 There is no baggage and no cumbersome technology arrangements (think BIS and BES) with which to contend.<\/p>\n

Samsung is set to launch its ATIV Windows phone (essentially a Galaxy that runs Windows instead of Android) in the United States about a week before BB10 hits the market.\u00a0 \u00a0We\u2019ll see which ends up making a bigger splash.<\/p>\n

I wouldn\u2019t be too quick to short RIMM at the moment.\u00a0 It\u2019s simply too hot to touch.\u00a0 But once the new release hype has run its course, RIMM could be an absolute feast for bears.<\/p>\n

Disclosure: Sizemore Capital is long MSFT.<\/p>\n

SUBSCRIBE <\/a><\/strong>to Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

The post BlackBerry 10 Will Not Save RIMM<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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