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BoomBustBlog Research Performs a RIM Job!
Nealy a year ago today, I told my readers that Research in Motion is looking like a strong short play. It was trading somewhere around $62 then. I have subsequently released several research reports and models illusrating the bear thesis in detail. Keep in mind that the early summer of 2010 saw its fair share of RIMM bulls, and the fact that Research in Motion had very strong accounting earnings blinded many to the obvious trends that have already set in. This combined with the strong Blackberry brand caused many to dismiss, or even worse, ridicule our analysis. Reference an article that I posted on Seeking Alpha, which recieved 87 Comments while the stock was in the $60 range. The article was about RIMM as a short candidate, but becuase the word "Apple" was mentioned it became an Apple lovefest. In addition, most simply refused to accept the bear argument for RIMM. The article made clear that the issues affecting RIM's margins will be the same issue affecting Apple's margins - competition!
Other articles drilling down on RIM's strategic positioning and deterioraring trends that were syndicated to sites such as Seekig Alpha, with one in particular, Review of Research In Motion’s Q2 2011 Earnings Announcement on Mon, Sep 20, 2010 garnering such devotion to the Blackberry brand and RIM that one would not have believed one was perusing an investment site. Feel free to peruse the 34 Comments. Well, RIM has dropped 50% since then. What the commenters on these sites and those who remained long RIM failed to realize was that brands in mobile tech will only go so far considering how rapidly the market is innovating and growing, at the same time compressing marigns. They also fail to understand the business model that Google has innovatively adopted to push Android through vendors and 3rd party distributors as a low cost open source product, yet still derive earnings and value by the boatload. Android is easily the fastest growing, and probably the most advanced mobile OS available, and Google literally benefits from margin compression in the hardware and software space. Not only do they benefit, but they have a literal army of world class hardsware, software and telecomm partners wlling to help them achieve their compressed margin ends. This model will, and has, literally wrecked havoc with integrated vertical models, ex. Blackberry, and very soon Apple. If you think of past as prologue, or even worse fall in love with a brand or company, you will lose sight of the forest due to tree bark...
Current day: Research in Motion Profit, Sales Forecasts Disappoint
Research in Motion shares fell sharply Thursday after the company delivered an outlook that was far short of expectations, even as it edged profit forecasts for the most recent quarter.Blackberry.comBlackBerry Bold 9000Shares of RIM plunged more than 16 percent in extended trading following a trading halt that lasted about 40 minutes. Get the last after-hour quote for RIM here.The maker of the BlackBerry line of smart phones said it sees earnings in the current, fiscal second quarter coming in between 75 cents a share and $1.05 a share, and for full-year earnings between $5.25 and $6 a share.Those numbers fall well short of analysts' expectations of $1.40 a share for the fiscal second quarter and $6.29 a share for the full year, according to estimates from Thomson Reuters.Also for the current quarter, RIM sees sales of between $4.2 billion and $4.8 billion, short of the expected $5.46 billion."The guidance was just awful. The devices are receiving less shelf space and less support from carriers," said Peter Misek, managing director at Jefferies & Co.
...
The company said its gross margins, among the highest in the smartphone industry, will likely slip around 5 percentage points to some 39 percent in the current quarter.
"Fiscal 2012 has gotten off to a challenging start," co-chief executive Jim Balsillie said in the earnings statement. "The slowdown we saw in the first quarter is continuing into Q2, and delays in new product introductions into the very late part of August is leading to a lower than expected outlook in the second quarter."
Balsillie said the company is reducing its headcount but specified that it's a "streamlining" not a restructuring move.
Since RIM has breached our forensice analysis valaution bands, and is now in the area covered by our multivariate model, I will release the "pro" version of the RIMM research for all to see. Now you get to see what subscribers had access to this time last year to drive profits through what was then a contrarian position in RIMM. Click the image below and navigate the pages using the left and right arrows at the edge of each page, 46 pages in total.
Click the this link and scroll down to this point on BoomBustblog to click thumbnail below this graph and hold your cursor over the resulting image to navigate pages.
From BoomBustBlog's RIM Archives:
I also warned again in April - Blackberries Getting Blacked Out, Imitate Amateur Base Jumpers Sans Parachute! Friday, April 29th, 2011):
On January 20th, I posted "Blackberries Lost More Market Share Than We Bearishly Anticipated While RIMM’s Share Price Spikes: Is It Time To Revisit the Bear Thesis?". I turned bearish on RIM last summer and made some money on its dip back then. Shortly afterward, its shares did the QE thing, despite the fact Android started sucking up market share everywhere while simultaneously squeezing margins like orange juice. As excerpted from the aforementioned post:
We have updated our mobile OS and handset manufacturer market share model and will make it available to subscribers as an online app by next week. In the meantime, let’s review some of the findings – vendor by vendor. First up is Research in Motion. This was a profitable short in 2010, with the share price hitting our targets within 100 pennies. Since then, the stock has risen appreciably. Let’s take a look to see if the rise was justified.
Page 5 of our Research in Motion forensic analysis (released in the summer of 2010 - 
RIMM Forensic Analysis and Valuation – Professional & Institutional or RIMM Forensic Analysis and Valuation – Retail) clearly stated that while we expected RIMM’s handset shipments to rise as a result of a rapidly expanding smartphone market, it will lose considerable market share....
As it turns out, it appears that we were erred slightly to the optimistic side with an 18% market share estimate for 2010. By the end of the 3rd quarter, RIM has fallen to 15.3% according to information calculated from IDC, and its decent has accelerated far faster than even we (the bears) have anticipated – a full 350 basis points for the quarter. This is 6x the decent of last quarter and 7 x the decent of the quarter before that. It is quite safe to assume that they will be materially below this point at year end (the data that we crunch is lagged by a quarter). This market share loss is most assuredly caused by the outsized growth of Android, which I will demonstrate in a minute. Below are charts generated from an updated version of the subscriber document 
Smartphone Market Model – Blog Download Version:
As you can see above, for the full year of 2010 RIM has trailed smartphone market penetration growth and that trail has increased each and every quarter with the rate of decent rapidly increasing.
RIM’s share price has benefited from an increasing equity market as well as the announcement of new products. The Torch, although possessive of redeeming new qualities, is essentially still a generation behind Apple and 1.5 generations behind Android. See RIM Smart Phone Market Share, RIP?…
Research in Motion is following the EXACT path we at BoomBustBlog had laid out for it since the 3rd quarter of 2010. Notice the share price announcement since our January 20th pronouncement.
I personally see a clear leader in mobile computing becoming visible in 2012. Using options, a minimum of 2012 expiration OTM and ATM contracts can be purchase at the most optimistic break points demarcated by the model above after being populated with assumptions you feel most valid. I will have a proprietary BoomBustBlog option model available for download to paying subscribers by the end of next week, at which time we will revisit the analysis above.
Blackberries Getting Blacked Out, Imitate Amateur Base Jumpers Sans Parachute!
The following are subscriber downloads and illustrations. Please click here to subscribe or to upgrade your subscription.
- RIMM Forensic Analysis and Valuation – Professional & Institutional: a 45 page analysis of RIMM, it’s strengths, weaknesses and prospects and probably the most thorough valuation that I know of concerning this company.
- RIMM Forensic Analysis and Valuation – Retail: a 10 page abridged version for my retail clients, containing all that you need to know including the market scenario valuation analysis (see Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion for more information).
- Smartphone Market Model – Blog Download Version: the interactive smart phone market analysis and penetration model, includes data for HTC, Apple, Nokia and Research in Motion
- RIMM Multivariate Valuation Mode: the big Kahuna, for professional and institutional subscribers only. Please review the following overview of the model.
- advertisements -
It seems in mobile there's nothing but Apple and Android anymore. Gbye rimm, symbian, Nokia, windows mobile, meego, it's enough trouble for software writers to support 2 platforms. Nokia, Sony Ericsson and others have released impressive phones for years...impressive on paper and tech specs. But they all suck, because THERE IS NO SOFTWARE: Symbian is not interoperable. Enjoy your $500 brick for a phone, while Apple & Android users are really using and enjoying theirs.
Buying a handset is like buying a computer, except here Windows doesn't dominate. It's Apple's closed garden or Android's open one. Rest are a big short.
is Apple a "closed" garden compared Googles Android when you count the number of independent Ap software developers?
Apple are an expert and uber-reliable software developer (for decades). The base is solid as a rock. Is Android? Judging by the clunky, buggy joke revealed in Reggies wonderous Samsung Galaxy Droid-Pad video a couple of weeks ago it seems Googles base is as solid as that other joke software company, Microshite
Googles expertise is Search, no question. But what do the Goo founders and their nutty Mr Schneider think they can do against a software smoothy like Apple? They've taken over the flog-a-dead-horse business model of Microshite of copying Apples lead by buying in the expertise (and companies) they don't have ...history teaches us it never works from a number of angles
RIM- what's the bottom?
who let Reggie have a beer before he decided on the title?
only worry for a rim short is msft and freaking ballmer. a better outcome for the rim guys is to be bought by hpq and merged with the remnants of palm. dunno if hpq can see this.
Nice work.
Just played with an app written for Apple iPhone and iPad vs the app for my DroidX. The app for my droid absolutely sucks. Crashes, doesn't respond, less features, etc.
We have also beat an android app to market by nearly 4 weeks now. The company is still waiting for the Android team to deliver.
Meanwhile I now can write... iPad apps, iPhone apps, and of course soon OSX apps! Meanwhile new MacBook Airs are around the corner, plus Lion, plus iCloud, plus ?
And you want to compare this to RIM????
So sorry, but the idiots who pay for your stupid overpriced apps will be out of money soon so it really doesnt matter if android sucks ass too. Smart-phones are tired, the whole industry has a lot of room to fall.
Oh, come on - I'm bearish on the US Economy but I think it's going to be a long time before US consumers are too poor to afford a $1.99 app. They will give up everything else before their cell-phones.
Oh, come on - I'm bearish on the US Economy but I think it's going to be a long time before US consumers are too poor to afford a $1.99 app. They will give up everything else before their cell-phones.
Reggie, you are right on RIM and wrong on Skype.
Balsille lost the plot when he decided to spend his time trying to buy a hockey team. As Reggie notes, the strategic planning at RIM wasn't, and isn't, up to par. I bet Gary Bettman doesn't have a BB.
Performs a RIM job? Is it Friday already?
Should we assume the author knows what a rim job is?
We have a records manager (a lady in her 50's) who uses the term in her Records & Inventory Management classes & newsletter column.
She hasn't used it in the last couple of columns, so maybe someone clued her in.
All applesauce Zero Govt... how's AAPL doin today?
Yes, the past 15 year performance of the company and the stock should be secondary to how it's doing today. Brilliant.
Ying-Yang
Refer to my answer above to 'Christobevil' which gives you the past 3 months performance. If you want to know how Apple compares over the past day;
Apple: Friday down -1.51%
Google: Friday down -3.07%
Why do you ask?
"The article was about RIMM as a short candidate, but becuase the word "Apple" was mentioned it became an Apple lovefest.... They also fail to understand the business model that Google has innovatively adopted to push Android..."
Sorry to spoil your Google lovefest and Apple hatefest Reggie!
Wouldn't want to obscure the view when you get egg on your face as Google takes up the Microshite business model of copy-catting Apple, being left in their jet trail and desperately try to flog 2nd rate cribbed, bought-in also-ran junk as cheap as chips (fab biz model that!!)....have you even seen the video (you posted) on the comical Samsung Galaxy Tab yet???
fantastic research Reggie, absolutely marvelous ...how would you like your egg on your face: fried, hard boiled or scrambled?
Apple is down
I think that explains why ZG is upset. Oops, did I say that!
ZG you holding or an employee? Or both?
Apple is like religion.
Either you are blinded by faith to attack others in defense of it or you are blinded by hate to attack those who defend it.
Jobs is the second coming.. The Anti-Christ for sure.
6 junks and 5 Apple-haters so i'll put Reggie down as the missing No.6 ...that's because Reggie hasn't responded to my arguments in weeks having been hammered into the pay-dirt everytime he has... licking your wounds Reggie or just hiding?
Christobevil - do some basic research before you shoot off (and shoot yourself in the foot). In the nearly 3 months Reggie 'came out' (no not as gay, but short Apple) i've been keeping a track of which Co shares Reggie should have shorted... it's the same old story, only good for the glue factory Goo being flogged by thoroughbred Apple:
Apple down -9% (from just over $360 per share down to $320)
Google down -18.30% (from just over $580 per share down to $485)
So once again Reggie could have doubled his money shorting his beloved Goo if he could swallowed his pride (before a fall) and seen past his persistent Apple-hating. But Reggie is a 'man of maths' of course, which is precisely why his arguments don't stack up on his short
Stax Edwards - i'm neither an Apple crone nor an employee. Just a long-suffering ex-customer of Microshite and those thieving global monopolists, Gates & Bulmer. And i can see the exact same copy-cat thieving business model employed by Google as Microshite used and they're going to end up exactly the same way: forever copy-cating Apple with cheap, clunky also-ran products (100% Guaranteed)
Almost Solvent - defending Apple is not a "religion". The knockers of the best consumer technology company in the world (Apple) who has had a sharp-as-a-ciramic-knife brand, business plan, marketing, software and leave-the-others-in-their-wake product releases over the past decade seems to require the religous biggotry don't you think?... because Apple is near perfect cool while all the others have been (as a matter of unquestionable fact) also-rans... you've got to be a right fuking twat to hate silky-smooth leader Apple haven't you?
Me i like Apple simply because they are uber-reliable and not bug-ridden clunky crap like all the other cribbers. Reggie for example needs to check out his Samsung Android Galaxy Pad demo' video he posted 2 weeks ago to see what wonders of copy-cat crap his beloved Google is about to launch on consumers. I can assure you they're going to get the same 'toxic brand' reputation Microshite so richly deserves also forever copying Apple
Blinder Dundat - Mr Jobs is neither the "2nd Coming" nor the "anti-Christ", but i understand where you Apple-haters are coming from with your loony religous fervour/fever. Jobs is just the head of the smartest, coolest, smoothest, leading consumer electronics company in the world today. Head and shoulders above the rest and leaders of the pack. Period. So please deal (at least try) with reality and facts and not your zealot religous fantasies. Peace & Love
Jobs is the second coming.. The Anti-Christ for sure.
Agnosticism, FTW!
I just wish Safari didn't blow chunks on my iTouch (my one and only Apple product).
And RIM still has a way to go...down.
It will soon go into the single digits.
I don't think so! If you take out the cash it is trading at about 3 X earnings. There are a lot of BB users who will not change because it is part of the IT structure. I changed to an IPhone obly after I left the big Government. I suspect that it will be bought out...Cash, good customer base etc. I just bought back. When others hate it--is time to buy!
Ive been saying RIMM would see single digits since my $140 shorts on that Canadian scam long ago.
RIMM is a one trick pony (with a stale trick at that). How Reggie tries to equate RIMM with Apple is beyond me.
I do indeed remember you calling this exactly, just after I joined ZH.
nice work as always Reggie. did you make much money from it?
I hear he got a tossed salad for his efforts.
Reggie, you da man! nice call.
This is what happens when the President of the company can't understand why anyone would want to use their PDA for anything besides text messaging.
I sort of agree with that. RIM shown they are blind when they fought NTP. Also, their marketing is crap, and they don't know/understand their niche, namely texting and e-maling.
you mean Reggie isn't just trashing everyone but Google in the mobile/tab field because he's a hired attack dog (crone)???
...my apologies Reggie, i've got it all wrong, you're a genius ...as time will surely tell
Hilarious title Reggie