BB - BlackBerry

[Viking]

I first got interested in RIM when it got whacked back in Sept. It appears FFH purchased 2 million shares right around this time. RIM just looks incredibly cheap. Further, RIM's death (due to Apple/Android Op System) appear to me to be a little premature and I am surprised with how aggressive the sell side has been in trying to take down RIM. Should RIM continue to post decent results we could see quite the short squeeze... (this one kind of reminds me of FFH).

 

RIM Share Price (CAN$) = $61.70

2010 Est EPS = $6.32

PE = 9.8

2011 Est EPS = $7.15 (RBC est excluding PlayBook)

Forward PE = 8.6

 

Major strengths appear to be business market and international markets. They also have a very strong new product pipeline (PlayBook coming in March/April). Their free cash flow is huge, that have already maxed out their share repurchase program and they are sitting with $2.5 billion in cash and they have no long term debt. Major weakness is not growing as fast in North America due to Apple and Android devices.

 

Essentially Mr Market is of the opinion that Apple/Android Op System have already struck their death blow and RIM is doomed. Listening to the RIM conference call my read is the company feels their market opportunities are exploding (geographic and product), they have a great product portfolio (with many new products) and rapid sales and profit growth will continue in 2011 and beyond.

[Viking]

For those sophisticated investors here is Cramer's wisdom regarding RIM:

 

Research In Motion [RIMM  61.92    2.82  (+4.77%)  ]: Don’t buy, Cramer said. While he understands the case for the stock, that RIMM is doing well overseas, Cramer doesn’t like the fact that the company’s sales are suffering here in the U.S.

[Uccmal]

I have followed RIM for years and been in and out for short trading stints.  There is alot to like and alot not too like.  I understand fully the thesis of Cramer and others. 

 

Major negatives:

- moved from being the innovator to playing catch-up.  I own a 1,5 year old BB curve and the I-phone of similar vintage is a much better device in my opinion. 

- data costs - they are trying to sell the playbook as BB network compatible -unless they bring the price of data way down I am not biting.  The competition in this space is huge and pricing is going to come down real quick.  Side bar comment on this re: Apple.  they are going to bring down the price of the I-pad and their own profits will get squeezed.  Savvy consumers can buy a netbook for way cheaper than either of these devices.

- lots of free cash flow - heard of Dell?

- Playbook - I think they are too late to make a major profit on the device

 

Positives:

- Secure network - As long as they keep this up they should be able to keep their gov't and corp customers even with weaker devices.

- Management - tough as nails and used to being the underdog. A tech innovator from Canada? 

- Ubiquity of BB - Obama uses one;

 

All in all it is a better value at < 50/share when FFH bought and I bought - I have since sold at about BE - other better deals.

 

[roundball100]

Despite the continual bashing of RIMM (RIM.TO) by Americans, they seem to offer a whole lot of upside for not too much downside.  One view (perhaps optimistic) is that RIM is on the cusp of a transition from a smartphone company to a computer hardware/software provider, with their Playbook tablet appearing to be much stronger than first believed.  I have voted with my wallet on this one now (the stock that is -- their tablet is not available for a few months yet). 

[Rabbitisrich]

Despite the continual bashing of RIMM (RIM.TO) by Americans, they seem to offer a whole lot of upside for not too much downside.  One view (perhaps optimistic) is that RIM is on the cusp of a transition from a smartphone company to a computer hardware/software provider, with their Playbook tablet appearing to be much stronger than first believed.  I have voted with my wallet on this one now (the stock that is -- their tablet is not available for a few months yet). 

 

Yeah, I'd like to see it too. After using the Kindle, I'm more open to the idea of a 7-inch tablet.

[Viking]

Does there have to be a single 'winner' in wireless? The space is also evolving rapidly (look at where tablets were a year ago and where they will be a year from now). My read is RIMM will continue to grow its brand well enough (global focus with solid line extensions like Playbook) that it should continue to do well and grow their top and bottom line by double digits for the near future. Should this happen, the stock is grossly undervalued. Yes they have issues (they are not growing as fast in North America). I just see a market that is big enough and growing so fast that there is ample room for a number of players to do well.

[shalab]

Does there have to be a single 'winner' in wireless? The space is also evolving rapidly

 

This is correct but as the market consolidates, market will consolidate around three players. Who remembers "Packard Bell" and "Gateway"? The question is who will be the "Packard Bell" and "Gateway" in the mobile space? Will that be Nokia or will that be RIMM?

 

 

[Guest valueInv]

Does there have to be a single 'winner' in wireless? The space is also evolving rapidly

 

This is correct but as the market consolidates, market will consolidate around three players. Who remembers "Packard Bell" and "Gateway"? The question is who will be the "Packard Bell" and "Gateway" in the mobile space? Will that be Nokia or will that be RIMM?

 

 

Apple, Android, Windows?

 

I think Windows is the wildcard and may end up surprising us.

[Myth465]

I think RIM is toast. All they have going for them is security. My company would really like to drop the server fee. Windows is free. Plus I hate my black berry.

[roundball100]

I should have been more precise in my earlier post.  For RIM the growth story is less the U.S. market -- where they are losing  share in the smartphone space, though the pie itself is growing -- and more on other markets (e.g., South America, U.K., Indonesia).  That being said, no one should underestimate how fierce the competition is, and there will not be 5 big winners in this space.    Android growth is, and will continue to be, phenomenal, though I believe Android should be considered in a separate category from Apple, Nokia, RIM, Microsoft (Google leads the development of the open-source Android O/S, but there are countless device manufacturers).

[shalab]

there will not be 5 big winners in this space.    Android growth is, and will continue to be, phenomenal, though I believe Android should be considered in a separate category from Apple, Nokia, RIM, Microsoft (Google leads the development of the open-source Android O/S, but there are countless device manufacturers).

 

When looking at winners and losers, it is the business model that one should look into.

 

From that perspective:

 

Apple - unified HW and SW solution, great app store, great experience. Primary target - consumer.

Android/Windows Phone: Same business model. The difference here is the same as Unix vs Windows. Windows promises a unified experience across devices. Microsoft/Google can provide seamless integration with the cloud, e-mail services and office documents. From an enterprise admin standpoint, windows phone offers more secure features.

RIMM - unified HW and SW solution. App store hasnt taken off, experience so-so. Primary target - enterprise. Charges for the software separately.

Nokia - unified HW and SW solution. Hasn't taken off in the smart phone space. Primary target - consumer

 

Now, you can tweak some parameters and see how this will play out in three-five years.

 

 

[Myth465]

I think these 2-3 are the clear winners.

 

Apple - unified HW and SW solution, great app store, great experience. Primary target - consumer.

 

Android/Windows Phone: Same business model. The difference here is the same as Unix vs Windows. Windows promises a unified experience across devices. Microsoft/Google can provide seamless integration with the cloud, e-mail services and office documents. From an enterprise admin standpoint, windows phone offers more secure features.

 

----

 

Apple makes money off hardware and apps. They also maintain crossover appeal and get access to the Corporate space for tablet and laptop sells.

 

Google makes money off apps and may get to monetize Android somehow at sometime. They also keep internet access open.

 

Windows gets to stay relevant and may cannibalize Rim as the preferred Corporate device.

 

-----

 

Rim - Goes into Runoff.

 

Nokia - Lives or dies in the third world and maybe Europe.

 

 

 

 

Thats my bet.

[roundball100]

I think RIM is toast. All they have going for them is security. My company would really like to drop the server fee. Windows is free. Plus I hate my black berry.

Myth - is there a significant lock-in factor or cost preventing you from switching to a competing infrastructure/devices, or is it just inertia?

[roundball100]

But I assume the lock-in is from your friendly IT guy in the enterprise environment.

[Myth465]

My blackberry is personal but you are correct most of my coworkers are trapped with the same devices due to our local IT guy. Most of the executives however have IPhones which are being "tested". Interesting times.

 

I will be switching when I can find a cheap Windows 7 phone which may take a while.

[roundball100]

Myth - why did you originally buy your Blackberry (did you expect more than you got, have better things since become available, ...)?

[ERICOPOLY]

I got rid of my Blackberry this summer for an IPhone.  I hated the Blackberry so much that I switched from Verizon to AT&T (the only IPhone provider).

 

I wanted a better browser -- that was the core reason.  Of course, I love the integrated IPod on the IPhone too (with Bluetooth I just play music on my new Pioneer Elite streamed from my IPhone).

 

 

 

[Myth465]

I thought Windows was dead and got annoyed after the 4th broken HTC phone. I decided I should get on another platform like the IPhone, or Android. I am anti Apple and for some reason went back to RIM before trying the Android. With the blackberry I feel like its 4 year old technology.

[FlyingArrow]

Sounds like I might be the odd duck here....

 

Personally I think the story is compelling for RIM. Here's some quick thoughts - random and anecdotal as they may be...

 

Some thoughts on corporate:

1. I'm an Apple guy. Mac's at home, kids have iPads, wife has iPhone. As for the iPhone I tried hers for a couple of days. Love it for the fun stuff and browsing. Drove me crazy trying to email. Would never consider it for work.

2. As with most business people I've always used a Blackberry at work. Hated the browser. Got a torch a couple of months ago. Love the browser, love it for media, love it for email as it has my trusted BB keyboard. Occasionally use the soft keyboard for short mail but similar to iPhone, they are not optimal for typing. There is nothing I feel I'm missing on the Torch vs. the iPhone.

3. For the longest time I've seen a lot of business people with both a BB for work and an iPhone for personal use. We all need to simplify. I think many will consolidate on the torch (with a tethered Playbook to come).

4. I know of 4 people who were allowed to switch to iPhones at work and within a month dumped them and went back to the BB. The business world has gotten incredibly efficient sending emails on BB's and the iPhone is no substitute. Those people went back to BB's when they only had the Bold. Now with the Torch I'm sure they are even more satisfied.

5. I had a conversation with a financial planner at a New Years Eve party who has a client who switched his entire small company (60 users) from BB's to iPhones with great hoopla. Everyone was excited. The vast majority now hates it and wants to go back to BB's. The guy is kicking himself.

6. There is far more inertia in corporate IT with BB's than many are considering. With the torch's arrival and Playbook imminent you can bet they are digging in their heels as they know they can satisfy their users with what is to come. I can say that is the case for three CIO's I canvassed on this.

7. I strongly believe RIM will be the Gorilla in the corporate market for some time. We all saw corporate challengers to Microsoft but look how long they have owned that space and continued to milk oversized profits from it. Curious that we never see stats purely on the corporate market. I think they would be more telling. I've heard alot about XX% of Fortune 500's are trying iPhones. Well, I've seen the results of a few trials.

 

Some thoughts on Personal and consumer use:

1. I bought my mom a seniors phone this Xmas. The phone's not relevant. The buying experience is. While in the cell phone store I counted the phones. 25% of devices were BB devices. The iPhone is one device at the high end. I asked the manager what the percentage of sales were that came from BB's. She said around 25%. I laughed and told her that lined up with my device count. She looked at me like I was some kind of freak for counting phones...

2. While waiting I watched a mom and daughter at the counter. Mom is a business person. Daughter (16) got a new BB curve for Xmas. They were signing up for a data plan and using BB messenger between them. Daughter uses BB messenger amongst all her friends. They must all have BB's too.

3. Went to Blockbuster right after I left the cell phone store. The 17 year old dude at the counter goes nuts over my Torch. Says he's getting one in a week and can't wait. He thinks it's the best device on the market. Lives on texts and wants BB messenger and the big screen browsing of the Torch.

4. I use the kids iPads occasionally. I hate that they don't do flash. Had to break it to the kids when they wanted to go to my little pet shop online but couldn't because it uses flash. They love them now with all the apps and don't do much web browsing anyway. But for me, I want a device that supports flash. And I don't want a 3G device and another monthly bill. I will use my corporate BB tethered. Company pays the bill. I will be even more productive. And the form factor is way better for a business guy with too much to carry as it is.

5. I've tried a Kindle and I'm buying one for a reader while traveling business. Far better device for the purpose they either iPad or Playbook. Not all that relevant but supports the notion that devices built for specific purposes will win for that purpose. Playbook will win for business. iPad for the rest.

 

Some general comments:

1. For the longest time I was concerned that RIM was too set on doing everything in house and by themselves and their corporate roots would result in them falling too far behind in things like usability, user interface, and cool factor. Even with those concerns I thought the market was throwing them in the trash just like FFH a while back. I bought in pretty big at $48. At the time had no idea that Prem and team were in too.

2. As the fall progressed I was happy with RIM moving to $60. Started thinking about what's next. Then I see RIM acquiring TAT. Now it get's interesting. How many of the detractors have considered what this could mean? Some interesting thoughts here:

http://blogs.blackberry.com/2010/12/rim-welcomes-tat/

http://www.androidguys.com/2010/12/02/astonishing-tribe-acquired-rim-honor-current-android-agreements/

 

Look at some of the video's on TAT's site. I think the cool factor won't be a problem anymore! Oh, and it's interesting that their technology is in 470 million phones. 15% of all phones sold in 2010. 20% of all touch phones sold in 2010. As the article above suggests - those other phones need to go somewhere else for "cool" now. RIM is the focus.

 

I believe the market is pricing RIM based on imminent death like they did with FFH back in the day. The only difference is that FFH got closer than I think RIM ever will.

 

When I bet really big on FFH I can honestly say I did all my homework, knew more about FFH's business and financials then my own company (only because Prem shares so much with his shareholders in writing and the annual meetings - Thanks Prem!). With RIM I can't say the same. The thesis is more in my gut. I'm making the call on a purely different level. But I've plowed in at $60 with similar conviction that I had back in 2003 and 2006 on FFH's big dips - as with FFH I'm using common and the leaps. I hope the future treats me as well and this doesn't prove to be a lesson.....

 

So far so good.  ;D

 

Long RIM, FFH, SSW, FBK, GE

 

Cheers,

 

 

 

[Viking]

Here is a nice summary and forecast for 2011 for smartphone manufacturers and operating systems. Author (Tomi Ahonen) sees some nice opportunities for RIM to take share from NOK. The primary risk to RIM looks to be if Apple launches a phone with a QWERTY keyboard. With RIM trading back to $61 hard to see any NOK upside priced into the shares. Has anyone come across any other good articles discussing RIM? Thanks.

 

http://communities-dominate.blogs.com/brands/2011/03/preview-bloodbath-2-electric-boogaloo-the-smartphone-wars-in-year-2011-will-be-bloodier-still.html#comments

[Viking]

RIM today reported fiscal Q4 2011 earnings (Feb 26 year end).

- Q4 earnings of $1.78/chare were roughly in line with guideance provided by the company and what was expected by analysts.

- Q1 2012 guidance provided by the company of $1.47 to $1.55/share was $0.10 to $0.15/share below what was expected by analysts; rev and GM also came in lighter than expectations.

- fiscal 2012 (full year) guidance provided by the company = $7.50/share was higher than what was expected by analysts.

After hours: shares are trading down 10%.

 

Reasons provided for lower Q1 guidance:

1.) mix shift in handset towards lower ASP products

2.) increase spending on playbook launch

3.) increased spending on QNX operating system

Regarding the handset mix shift, RIM will be launching new Blackberry products at the end of Q2 and more in the 2nd half of fiscal 2012, and as a result Q1 Blackberry sales will slow somewhat (mostly products at the end of their life cycle).

 

RIM believes they are in the process of laying the groundwork that will set the company up for the next stage of growth for the next few years:

1.) playbook

2.) 6.1 smartphones coming in 2H

3.) QNX smartphones coming by March 2012

It is clear they are also targeting Nokia as providing lower price range smartphones for international markets were also discussed on the conference call.

 

I expect the anti-RIM crowd (pretty much everyone) to hammer away pretty hard in the coming weeks so the share price should go lower (to back to under $50???). My read is paying $58.00 (after hours level today) for a company that should earn $7.50 in fiscal 2012 is reasonable given the solid products the company has in its pipeline. The fact that everyone hates the company actually makes me feel better.

 

PS: company also has $2.7 billion in cash and investments = $5.16/share and no debt. They will be able to resume their share buyback in July; last year they exhaused their allowable annual buyback when the shares traded below $50 (they spent $2 billion in fiscal 2011 on share repurchases); my guess is they will do another large share repurchase come July should the shares continue to trade at current levels.

 

Note: RIM is simply terrible at answering questions and communicating their prospects on quarterly conference calls. This does not help in the short term; fortunately, if they deliver the goods the share price will respond.

 

Here is a good summary from the Globe & Mail: www.theglobeandmail.com/globe-investor/rim-outlook-signals-time-of-transition/article1955529/

[Guest Bronco]

Biggest challenges facing Rimm.... Their products f'ing suck.

 

This is may be a cigar butt... A few puffs left before it is obsolete.  But I think a better comparison is taking a bite out of a dog turd.

 

WTF own this over Apple?  Why buy a crap business?

 

I am not anti-Canadian by the way.  Looking at making a move on tap if it treads to 40.  Also, you gents blessed us with prongs, Richards and carter...2011 S.C. Champs!

[DCG]

Biggest challenges facing Rimm.... Their products f'ing suck.

 

This is may be a cigar butt... A few puffs left before it is obsolete.  But I think a better comparison is taking a bite out of a dog turd.

 

WTF own this over Apple?  Why buy a crap business?

 

I am not anti-Canadian by the way.  Looking at making a move on tap if it treads to 40.  Also, you gents blessed us with prongs, Richards and carter...2011 S.C. Champs!

 

Yep. RIM was making start of the art products 10 years ago. They are still selling pretty much those same products.

[Viking]

Bronco, the challenge I am having with RIM is understanding the polarized opinions.

 

If their products truly suck so badly how do they sell 14.9 million units and earn $1 billion in the latest quarter?

 

More importantly, their future looks solid:

1.) operating system upgrade: QNX looks to be a solid improvement going forward from their current smartphone operating system. They are starting with the PlayBook and will transition into phones by March 2012. RIM is calling the QNX smartphone a 'superphone'; it will be high margin and they feel it will get them growing again in North America.

2.) new smartphone product lineup looks good (6.1) to great (QNX): RIM is saying interest in 6.1 phones is very high; they will be coming out beginning in May and later in the year. RIM will be featuring these phones at a RIM conference in early May so we will find out then if the company is blowing smoke or if the new models are competitive. A question was asked if sales of the new 6.1 smartphones will not suffer because carriers will want to wait for the QNX versions in early 2012; the answer was carrier interest in 6.1 is very high and this is not expected to be an issue.

3.) tablet offering looks good: RIM is targeting business customers and based on feedback it has received is forecasting very strong sales. We will know shortly if the company is blowing smoke. The PlayBook is quite different from other tablets (screen size, security, etc) and this market is very large.

4.) competitor Nokia, who owns the lower end of the market, is in massive transition: hard to see how this does not benefit RIM, especially in international markets where both companies are strong.

 

RIM just finished an absolutely terrific year; MUCH BETTER than everyone was predicting 6 months ago (when the stock was $45). If the company was going to 'disappear' this was when it most likely was going to happen.

 

Smartphone and tablet sales growth will be very strong in 2011. RIM looks to be poised to have a good to great year as it launches its new operating platform, PlayBook and much better smartphones and takes share away from Nokia (in the lower end international smartphone market). Note, I am not saying that RIM will eat APPLE's or Androids lunch; I think all three will do well; RIM is just trading at such a low multiple I like the value. The fact that FFH purchased RIM when it dropped below $50 last year also gives me some comfort. 

[Guest Bronco]

In school you can't do this, but I will.

 

Answer a question with a question.

 

McDonalds hamburgers - 1 billion, 1 trillion sold, whatever.

 

 

Now ask your question - if McDonalds sucks so bad, how did they sell 1 gazillion burgers?

 

 

I have a blackberry, but it is b/c my employer issues me one.  I also have an Iphone and Ipad for personal use.

 

I am not blind or stupid.  I can see what sucks.