BB - BlackBerry

[Viking]

Bronco, thank you for answering my question. We do not expect food-away-from-home to be supplied by one massive Apple like restaurant chain. Of course to suggest such a thing would be idiotic. That is because the needs of businesses/consumers (young/old) domestic/foreign are very different. McDonalds is successful because it services the needs (and very well I might add) of a segment of the food-away-from-home-market.

 

Obviously, RIM does not satisfy your needs; having sold 14.9 million units in the last quarter it is clear RIM is strong in a few segments. I am not looking for love... just some investing opportunities that may put some $ in my jeans.      

[turar]

McDonalds is/was a pretty good investment to make.

 

Viking, are you buying more today?

[Guest Bronco]

Viking - I get what you are saying.  And of course stuff like this is preference.

 

No one really knows where Apple and RIMM are headed LT.  I just don't see RIMM as the best of breed, meaning they could go bye-bye quicker than someone else.  So that is a major risk. 

 

The only risk right now for Apple is Steve Jobs health.  They are going to sell a ton of products, until the next wave of innovation happens. 

 

The thing that scares me about Apple is that if it is $500B market cap, a 10x FCF multiple would indicate $50B in free cash flow.  How the hell is that possible?

 

I think you ride Apple until there is a real chink in the armor.  No where close to that now.

[Viking]

turar, I established a decent position in RIM just under $60 at the beginning of the year. Since then, my read is 'the story' has gotten better. However, I will be reading their detailed quarterly results and anything else I can find to see if I am missing anything. I am not buying today as the stock is only trading a little below my purchase price (and I expect volatility with this holding) and I have learned over time to not be too aggressive in accumulating stocks on dips (becasue the dips can be larger and last longer then one would expect). Patience is the key. Should the stock drop in the coming weeks to the low $50 range then I likely would purchase more.  

[Viking]

Here is an article on RIM summarizing many of the risks: www.mondaynote.com/2011/03/27/rim-the-inmates-have-taken-over-the-asylum/

[S2S]

Early reviews of the PlayBook seem lukewarm at best. Also, here's an Engadget editorial that raises a very interesting comparison:

 

http://www.engadget.com/2011/04/14/editorial-rim-weve-been-here-before/

[mhdousa]

Early reviews of the PlayBook seem lukewarm at best. Also, here's an Engadget editorial that raises a very interesting comparison:

 

http://www.engadget.com/2011/04/14/editorial-rim-weve-been-here-before/

 

Now the numbers are painting a similarly difficult position for RIM. According to a recent Gartner report, RIM's market share is expected to continue a slow decline to just eleven percent by 2015

 

It amuses me that they can make a prediction about what the market will look like 4 years from now.  The iPhone hadn't even been introduced 4 years ago, and 5 years prior to that, the first Blackberry with a mobile phone had just been introduced.

Of course, this isn't news to value investors...

 

[woodstove]

I've never owned RIM before, but bought a small position recently, just to get on board.

It looks decent enough, to me, as an operational business.  Usual uncertainty; so what?

 

On the matter of Playbook reviews, pre-release, the following seems very level-headed.

It's a long read, which is good, though not for secondary writers looking for sound-bites.

 

http://crackberry.com/blackberry-playbook-review-official

 

Philip Fisher advice may be worth recalling.  See his book, about new plant startups.

Don't have the book here - loaned my copy to someone else - but basic idea is that

a new plant first has troubles, outlook is unhappy, then it starts running in at pilot

volumes = some enthusiasm, then reality sets in causes further disilllusionment, then

finally reaches full production volume maybe 10x pilot = the big enthusiasm happens.

 

RIM has the corporate mass, financial and technical talent, and talent coordination,

to come out the end of this process.  I'm quite comfortable with then as a business.

No idea where/when is bottom for stock price; believe current price is adequately safe.

 

ws

[S2S]

Trust me, the limit of any analyst's long-term forecasts is a well-rehashed point... but near-term forecasts, historically a much more insightful measure, don't paint a much brighter picture:

http://www.engadget.com/2011/04/07/gartner-android-grabbing-over-38-percent-of-smartphone-market-i/

 

Think about it this way: in North America RIM sales went from positive growth to negative growth in the last 4 quarters, while the overall market growth accelerated to over 40% year over year. This is not the story of a market transitioning from growth stage to mature stage... it's the story of a brand (Blackberry)'s desperately needing help.

[Liberty]

RIM certainly isn't the smoothest when it comes to PR..

 

http://www.washingtonpost.com/blogs/faster-forward/post/rim-ceo-ends-interview-in-latest-communication-breakdown/2011/04/13/AFbr8PXD_blog.html

 

Research In Motion co-chief executive Mike Lazaridis got some questions on the BBC television’s “Click” about the security of BlackBerry phones in India and the Middle East that he thought were unfair. So he ended the interview, with the cameras rolling.

 

“It’s over. Interview’s over,” he declared, saying that BlackBerry encryption is “a national security issue” and demanding that the BBC crew “turn that off.”

[Viking]

I am still amazed at how negative the news media is on RIM and how their death appears to be a foregone conclusion. Like I have stated before, I like the new stuff coming from RIM:

1.) Playbook next week

2.) new phones in 2H

3.) new phone operating system in early 2012

Bottom line, the company has promising stuff in the pipeline. This is a key difference when comparing them to Nokia, who is starting from scratch.

 

In the near term I will be closely following Playbook and how it is being received by Blackberry users and businesses (their target market). Key is the size as that is a key differentiator versus Apple; if they got the size right they will have a winner on their hands. My hope is the business community has guided RIM to the 7" size as being optimal; it would be interesting to understand what went into that decision. My guess is sales will start slow and should increase at a reasonable rate as the year progresses. I also expect alot on negative publicity as it will take courage to write a positive review of the Playbook; easier to simply rehash the negative instead of sticking ones neck out and talking about the positives (of which there are many). And I expect the stock to be VERY VOLATILE; a GREAT thing should earnings actually come in close to $7.50/share guidance provided by management. Investing in this space certainly is not for the faint of heart! :-)

[DCG]

The playbook is clearly being rushed out, as they made some horrendous design decisions (you can't use an email app on the playbook unless you have a Blackberry phone connected to it via bluetooth, there is no Contacts list, no data connection, no calendar, etc), and they're now looking to fix their mistakes with future software updates.

 

The biggest drawback for the Playbook is the lack of apps for it. Developers are all focused on iOS and Android. So not only are off to a late start releasing the Playbook, you'll have to wait quite a bit longer for any decent apps to be developed for it, and I'm guessing it will take quite a bit of sales to convince developers to develop for it.

[Guest Bronco]

I think the playbook is a great idea.

 

Now their phones won't be their only products that suck - you can throw tablets in there as well.

[Myth465]

As a former techie, classic late adapter, and Apple basher - I dont know.

 

Tech is becoming like Movies and Music. Its winner take all. I just dont see people getting excited about the Playbook like they do with the Iphone. Nokia has Windows 7, so they arent really starting from scratch. They just have to build a decent phone which they excel at.

 

Its tough. RIM has the corporate world on lock, should that every show cracks I think they are done. The personal space belongs to Apple and Android. Just my thoughts based on trends and anecdotal info. I have brought Sansa products in the mp3 space all my life, and they always have new great products, and amazing features. That has never mattered though. The question is though is there buzz, are consumers excited, are people lining up to buy, are early adapters buying?

 

This is the MSFT, of phones. Will work out well if they keep the lead in Corporate. I think the branching out will not be successful.

 

----

 

Call me crazy but a big driver of tech spending is wow factor. When you are on a plan and you pull out the latest Kindle, Iphone, Ipad, or other device part of the draw is the wow factor you get when people look over and ask you questions. Its about being fashionable, on the cutting edge, and keeping up with the jones. I just dont see an executive, nerd, middle manager, or whatever pulling out a black berry tablet and getting that. If its the same price just buy an Ipad, if its a bit cheaper stop being a cheap ass and just buy an Ipad. If you are really cheap just get an android tablet.

 

I dont see a space for rimm here which features high sells and high margins. Google will win on volume, Apple on margins. Rimm inmo is wasting R&D money.

[Viking]

Regarding Playbook, here is one of the more 'balanced' reviews that I have read: www.bgr.com/2011/04/13/blackberry-playbook-review/

 

In summary: "The PlayBook is a very solid product, from the hardware to brand new operating system, I love where RIM is going.

 

The company is entering a brand new space, and I can’t wait to see future versions of the PlayBook and even smartphones that will eventually (in 2012) use the new OS as opposed to the traditional BlackBerry OS. RIM has really made big advancements by acquiring powerhouses like QNX and TAT, but there’s only so much you can do with a limited time frame. I can’t help but feel like the PlayBook, as it stands now, is an unfinished product. The hardware is there but the software is buggy at times,and  the apps are severely lacking and almost non-existent in terms of quality. While the Web browser is extremely solid, with no native email or calendar or contact apps, the PlayBook isn’t a very good standalone product. This should all change in the coming months thanks to the free software update, and what’s even better is RIM no longer has to go through carriers to push out updates out since this model doesn’t have a carrier partner — we should see software updates fast and often RIM told me. I just don’t see a killer app on the PlayBook, and that’s the real problem. It does a lot of things, but it doesn’t do 90% of things better than an iPad 2 or a XOOM.

 

There’s a much bigger picture here, and while the PlayBook is important, what’s more important is that RIM skating to where the puck is going to be. The company’s new strategy breathes new life into this aging Java-reliant company, and with a little more time in the oven and some smart enhancements, tweaks, and updates, RIM really does seem to be setting itself up properly for the next 10 years. The BlackBerry PlayBook goes on sale April 19th for a starting price of $499."

[Guest Bronco]

I just saw their co-CEO, Vin Diesel, on Bloomberg.  Man that guy has let himself go.  He was in much better shape in XXX.

 

I feel like shorting the stock after that interview.  I think he said they gave an honest effort. 

 

Holy crap is that a POS.  The only people buying these turds are the software writers for apps.  Oh wait, they got their's for free.  Never mind.

 

 

[Guest VAL9000]

The fight that's going on in the mobile space today is akin to the fight that went on in the personal computer space back in the '80s.  The rapid adoption of a new, powerful technology by businesses and consumers alike resulted in a winner-takes-all battle for the platform of choice.

 

Here are some interesting points that I use to build a mental framework in which to analyze the likes of RIM, GOOG, etc.:

- Progression of computing technologies over time - cheaper, more powerful, more flexible, more widely adopted.  In order: mainframes, mini-computers, personal computers, smart phones.  This macro trend has been in place for decades, and each new evolution of computing results in a complete market shift.  Dominant market participant for each era: IBM, Digital Equipment, Microsoft, ?.

- The Highlander factor - the internet has proven that networked systems and services have room for one very large player and many much smaller players.  Think about every major service or platform delivered on the internet, and then try to name the next-largest competitor: amazon.com, itunes, facebook, ebay, craigslist, google.  In most cases, and especially when there's a platform involved, the lead market participant dominates over its competitors.  This is largely a corollary of Metcalfe's law: "the value of a telecommunications network is proportional to the square of the number of connected users of the system".  The impact: there can be only one!

- History repeats itself: Microsoft beat the tar out of IBM and Apple because they acted as a middle-man between hardware and software participants.  Anybody could build hardware for the Microsoft platform, and anybody could build software on top of it.  This resulted in a vibrant hardware and software marketplace with 1000's of competitors that all created value for Microsoft's customers, and for Microsoft.  By disconnecting two fundamentally different businesses and providing a reliable platform, Microsoft came to dominate the PC era of computing.

 

What about today?

 

A sea-change in computing technology is definitely underway, from traditional PC's to smartphone/tablet devices (they are the same class of product I think).  The platform is more valuable than ever, as the scope of the hardware and "software" is much greater than it was:

- Hardware: everything in your PC plus: GPS, Gyroscope, light sensor, cameras, cell connectivity, touch screen.

- Software: traditional operating system/applications/games plus: rights to all of your media (music, tv, video), payment system, the cloud

 

The real platform participants are Apple, Android, Microsoft, RIM and HP(Palm).  In thinking about their offerings in this framework, here's what I come up with:

- Apple - The leader today, but is the sole provider from the operating system and platform on down, plus they exert significant control on the software side.  They will be out-innovated by a more open platform in the long run.  This same thing happened to Apple in the '80s.

- Android - The up-and-comer.  Based on my thinking, Android is the platform to beat.  Their big challenge is making everything as integrated and clear to customers as Apple has with its integration, but that will happen.  When it does, the model will be hard to beat.  They look the most like Microsoft in the '80s.  Their growth rate is hard to argue with and the vendor-neutral approach fits in well with the Highlander factor.

- Microsoft - Late to the party.  The model is similar to Android's with some attempts to fix the fragmentation issues.  Too early to tell but the model is good.  I think Microsoft is doing itself a disservice by charging handset makers for the platform.

- RIM - This isn't looking very good.  It's (almost) the worst of the group.  They own a half-baked platform, plus they own the hardware and the OS.  They're like a lame Apple.  The independent software marketplace is nearly nonexistent.  With the migration of businesses from internally managed systems to cloud-based tech, there's a big reason to start considering more than just email capabilities, of which the Blackberry has few.

- HP (Palm) - The worst.  Everything I said for RIM but with fewer compliments.  These guys should just ditch the software and adopt Android.

 

I don't own any of these companies and I probably won't.  Picking a winner from this group is a gamble.  RIM is really the only pure-play option in the group and it's not looking good.  With the rest of these companies you need to carve out their other (sometimes awful) businesses.  I own a blackberry and use it all the time, but I hate it.  My next phone will probably be an Android.  I'm waiting for my iPad2 to ship.  So I spread the love as a consumer but spit the venom as an investor.

 

- VAL

 

PS. Sorry my posts are so long!

[Liberty]

PS. Sorry my posts are so long!

 

Don't apologize, this was very interesting. Thanks for posting!

[hyten1]

val9000 good points

 

however i do  want to point this out. I think the smartphone/tablet battle is slightly different than tht PC era battle ALL due to the so call cloud (I don't like buzz word, basically more and more service/software live on giant server farms).

 

I think this trend will put a dent (how big of a dent i don't know) the whole idea that ONE platform will take it ALL

[Guest VAL9000]

Hyten,

 

You're right, cloud services are a big part of the mobile computing shift.  I guess that the amount the platform matters will depend on how closely the service is tied to your device.  Google search is a service that barely exists on your device and therefore is platform independent.  Applications such as maps, which require access to GPS, or Facebook which leverages your camera, GPS, etc., are more likely to be platform specific.

 

As the innovation gap closes, the hardware feature set on all platforms will be roughly the same, and then the decision to build new applications on those platforms will generally balance need, cost, and size of market.  I think ease of development (part of cost) is one area where Microsoft may have an advantage.  Historically they have done a great job of providing tools to their partners.  This is one reason why Windows ended up dominating the enterprise server/software market.

 

Once the hardware offerings have been commoditized, consumers and businesses will mostly buy based on price and vendor reputation.  The evolution of the PC market shows this.  Where we used to spend $5000 on a mid-range PC in the late '80s, we now spend < $1000 for a mid-range PC...  but from completely different manufacturers.  So here's where Microsoft won in the '80s.  They let the software and hardware players compete, which drove down prices of the overall package that consumers and businesses were buying.

 

Going back to the original framework, if we look at who is poised to drive down prices, I have to give it to Android.  The OS is free and the ecosystem is set up for a healthy competitive environment on both the hardware and software sides.

[Liberty]

Part of the dynamic, IMO, is that Google would like the internet to be the platform (open standards like HTML, accessible from any device) and Apple would like the hardware itself to be the platform (local apps that only run on iOS, etc).

 

This isn't a perfect dichotomy, as Android also has an app ecosystem (though more open) and of course iOS also has access to the internet, but I still feel that both sides are pulling in different directions, and that a big motivation for Google to release Android in the first place was to keep those open standards as viable and vibrant as possible.

[Viking]

Barron's presents he bullish case for RIMM: the Blackberry Strikes Back: http://online.barrons.com/article/SB50001424052970204702304576257134247675322.html#articleTabs_panel_article%3D1

[Viking]

The smartphone industry is growing rapidly and changing even more rapidly. You have business/consumer and North America/Rest of World. Within each of these segments you have numerous other segments. Security is important for some / not so for others. In some countries handset providers subsidize the cost of the smartphone, in others they do not Regarding tablets, some want 10" screen and others prefer 7".

 

I see the market continuing to grow in size further with specific companies dominating different products and segments. I do not think we are moving to one company dominating all smartphone/tablet (and whatever future great new devices get launched in the next few years... of which I am sure there will be many). I don't see Apple (or Google) dominating smartphones the way Microsoft dominates the its core market.

 

What I am trying to understand is how good the products in its pipeline are. It sounds to me like Playbook is a great product; most importantly the QNX operating system looks to be best in class. This bodes well for the upgrade they are planning for the phones in early calendar 2012 (10 short months away). The purchase of TAT also addressed a huge issue (user experience with their phones). I will be watching Blackberry World closely and expect a couple of new announcements there. I think there is lots of room for RIM to be, at a minimum, a nice profitable player in some of the segments. Time will tell. :-)  

 

Here is a long article from this weekends Globe & Mail: www.theglobeandmail.com/globe-investor/rim-makes-a-play-for-its-future/article1987760/

[woodstove]

All the focus on Playbook is short-term, which creates opportunity for value investing.  RIM's business process is good, I think, and one can buy into it at a price which is almost assuming a runoff.  Philip Fisher's book - What to Buy - his 15 points, is a good frame to examine RIM.

 

Does the company have things to do?  Sure, and not just product.  But they clearly recognice the needs to do those things.  Every time one of the two co-CEOs is in musing-about-company mode, the press picks up on it as if that is a negative.  I think it's healthy that they have open minds, still looking for ways to improve.

 

We will see.  I'm comfortable with a couple of percent of portfolio in RIM.

[DCG]

RIM has tarnished its brand to the point where people are embarrassed to own their products. They have a ton of work to do if they ever want to regain their business, yet their management seems to have no clue how to do that.