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Hindsight Is 20/20, And As Luck Has It Our Foresight On Research in Motion Was Right On The Money Two Years Ago
In the early spring of 2010, while trading at over $60 per share and still a darling of the street and corporate users, I warned that RIMM not only would not be able to compete with Android and iOS, but will be a phenomenal short. Well, two years later, while trading in the low teens the RIMM research is still pushing out profits. Research in Motion reported a minutes ago and...
- RESEARCH IN MOTION 4Q REV. $4.19B, EST. $4.51B
- RESEARCH IN MOTION 4Q ADJ. EPS 80C, EST. 81C
- RESEARCH IN MOTION SAYS BALSILLIE RESIGNS FROM BOARD
- RESEARCH IN MOTION SAYS JIM ROWAN TO LEAVE
- RIMM WONT' GIVE QUANTIVE VIEWS DUE TO LONG TERM FOCUS
- RESEARCH IN MOTION REVIEWING STRATEGIC OPPORTUNITIES
BoomBustBlog banking and tech research has been quite prescient for 2010/2011. Subscribers who took advantage of this deserve kudos. To wit, and as excerpted fromAnother RIMM Job? It's Amazing How Many Institutions Don't Read The BoomBust!
Let's try this again: As Forecast Last Year and Clearly Demonstrated This Year, Research in Motion's Problems Are Far From Over
Research in Motion has been one of the most successful tech shorts of this blog's history (thus far). We first recommended a short last year and reiterated it in the fist quarter of this year. Reference:
- BoomBustBlog Research Performs a RIM Job!
- BoomBustBlog's Fundamental/Forensic Analysis of Research in Motion Has Returned 2x-3x Original Investment This Year!!
This is a snapshot of RIMM as of the writing of this article...
As you can see, the results have been spectacular, particular if well timed puts have been put to use. In January I posted:
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.
A 50% drop in price later... On that note, Bloomberg reports: RIM to Cut 2,000 Jobs as BlackBerry Loses Share to IPhone
...
Google's Android has, by far, inflicted much more damage to RIM than Apple ever has. This was easily seen over 13 months ago, at least by BoomBust Bloggers, referencing BoomBustBlog Research Performs a RIM Job!...
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.
Those that chose to follow this short recommendation had plenty of tools to assist in the decision making:
- 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.
RIM Model Assumptions
RIM Model Factors Driving Growth
After populating the assumptions tab, jump to the “Factors Driving Growth” tab and choose the player whose market share and penetration data you want to populate the valuation model for the sake of comparison. The choices are “Nokia”, “RIMM”, “Apple”, “HTC” and “Others”. This tab is annual data only.
RIM Model Quarterly Factors (driving growth)
On the next tab, you can do the same as the previous (this tab is quarterly growth). Each of the growth tabs has charts that are print and presentation quality. Just be sure to tell everyone where you got thesis, data and analysis from 
.
Other tabs in the model…
RIM Model Income Statement
RIM Model Device Market Analysis
RIM Model Revenue Analysis
RIM Model Device Revenues
Valuation and Multivariate Scenario Output
Final output is RIMM’s valuation using our analytics and your assumptions as input in the assumption tab above, as well as a multivariate scenario analysis showing changes in quite a number of variables (assuming all others remain the same) and their effects on your base valuation, as well as the percentage upside/downside from the current price.
Additional RIM writings...
- advertisements -
Anyone who missed the Rim call, please report for muppet duty.
Compaq, HP, Palm, RIM, all asleep at the wheel and run by accountants.
and IBM just sell maintenance contracts.
I think Apple is different (at least just now). They priced their products to just make them a tiny bit less than too expensive to waste your money on. That is high level economic and marketing skill. They pour the proceeds into re-investment. I think their war-chest means they are in for the long haul. I reckon they will crack the car-battery problem they are working on, and go on to become a huge corporation across many sectors (until they get middle-aged and the accountants take over too, or save themselves by splitting into one hundred new start-ups).
Reggie, I think you are pretty much spot on every time, but I think Apple is a new species. (I don't like them and don't buy their products, but that is only because they don't licence out to third parties.) I think Apple are the new Standard Oil, Carnegie Steel, Thomas Alva Edison and Ford Motor Co. all rolled into one. They might change everything
and as far as I know, they stay well clear of the Squid and the Morgue. That has to be good.
Hey guys, don't take this the wrong way, but if you are buying physical, there is ONE more item that you need to purchase (physically) and that is LEAD... in round form of course. You pick the style or form, but if you are stacking, and some guy decides that he likes your PHYZZ better then you - What you gonna do? Call the ghostbusters???
Yes, yes, yes... the reality check - of course you could just melt your silver and turn it into SILVER BULLETS. Which would of course defeat the purpose of acquiring Silver and Gold. Just saying...
Hey guys, don't take this the wrong way, but if you are buying physical, there is ONE more item that you need to purchase (physically) and that is LEAD... in round form of course. You pick the style or form, but if you are stacking, and some guy decides that he likes your PHYZZ better then you - What you gonna do? Call the ghostbusters???
Yes, yes, yes... the reality check - of course you could just melt your silver and turn it into SILVER BULLETS. Which would of course defeat the purpose of acquiring Silver and Gold. Just saying...
Irrespective of timing and it potentially being right, it's unfair to criticize Reggie Middleton about his Apple call. In trading and investing everyone is wrong sometimes (except Goldman Sachs of course!). In this job there's no such thing as a sure thing - the closest you'll get to it is insider trading.
With the self-aggrandizing bluster, RM is setting himself up for a flaming. Calls on blue chip names like Apple sets a reference point in readers' minds about him... but don't let that detract you from the quality of his other works.
SGFTQF,A? A.
I appreciate your objective review, but in regard to being right/wrong/about timing, see my comment above. In addition, this is about much more than making a call on a blue chip name that sets a reference point. I made a call that Greece would default exactly two years ago, and Greece is better known than Apple. Greece did default pretty much as I anticipated and I didn't recieve the flack for that longer term call that I did for Apple even though Apple was a shorter term call that didn't play out yet. The same goes for Goldman Sachs, Morgan Stanley, etc.
Apple is in a cultist class by itself, including both investors and consumers. I'm just saying...
My brother called this back in 1997. Of course, you would have lost a ton of money on the way. Timing is everything.
Don't tell me what. Tell me when.
RIMM need to invest R&D dollars into PR film exposing Apple's Foxxconn job in Chinese slave labor (which probably makes RIMM phones too but that can be edited out)
Corporate IT is still owned by RIMM. partner with google and switch to Android OS and Apple will be all alone but they let Samsung be google's partner.
You still shorting into Apples buyback Reggie?
I knew RIM and win mobile sucked ass because they never updated, just happy to sit on their asses and do nothing.
RIM was circling the toilet in 2007, look at their OS from 2002, its the same, same look, same functionality same bugs as today.
Even steel companies have to innovate and they sell steel beams, beams. not tech stuff.
If you cannot innovate, buy companies that can to save your ass. It's not hard.
RIM is so ass backwards those ceo's and coo don't have a fucking clue- hell the COO who is the CEO now said there is nothing wrong with the functionality or anything and will keep doing the same thing as the old ceo's. Must be nice to be that insulated from the world, and have yes men all around you. I have spoke with some of these type guys, is difficult to have a conversation about current events or other real stuff.
Releasing a Tablet that would not do Blackberry email was the tipping point for many. Had to tie the tablet to a Blackberry to get email? What could they possibly have been thinking? At that point is was clear they had lost touch with reality.
Hows your apple call going?
Actually, the Apple call is coming along just as I anticipated. You see, I believe your problems is that you don't understand the call. Practically everything that I alleged would happen to Apple has happened. The market share lost to Android, the margin compression, the growth rate drop in comparison to Android, the quarterly miss. Even the short reco turned out mildly (quite mildly, unfortunately) profitable as tight stops were the word du jour.
Now, I'm sure you have ignored all of those FACTS, and have decided to comment on speculation driven by others (and probably your) OPINION of what may be in the research that you didn't pay for. Let's get this straight as of now, all of these charts and data and analysis are born from paid subscription content. It is not cost free to create, thus the meat will not be given out for free. I just reviewed the valution numbers from the original report and not only have I been much more accurate on the revenue/units sold number than the consensus, and vast majority of the sell side, my valuation targets have been no more than 10-12% or so off (to the updside and/or downside) for the five months since issuing the report (at which point it would have needed to have been updated anyway).
In addition, I made it very, very, very clear on CNBC and through my blog and even here that the margin compression thesis will take many quarters to play out. I gave it 4 to 8 quarters from 0vctober 2010. Guess what happened 4 quarters from Oct. 2010 when I said Apple will deliver a miss due to competition? Is the time up on my Apple call yet? Think carefully!
So, you see, my Apple call is actually coming along quite fine if you guage it by the facts, my ACTUAL research, and what is actually happening. With all of that being said, I don't even care that much if the Apple call is wrong and neither should you. The key is to be right more often than you are wrong, not being right on every single call. I have been right more than often enough where I could easily afford to be wrong on Apple. The problem is in order for me to admit being wrong on Apple, I'd have to first be wrong on Apple. Talk to me this time next year and we can have this discussion in earnest.
Not withstanding the fact that this post was about RIM, not Apple and Apple was not mentioned once in the post.... Notice how these asshole style comments never occur with Goldman Sachs, IBM, GM or practically any other company, but with Apple...
People used to line up midnight at stores for the release of Win95, some even lined up for ME.
People always gonna line up for the newest bestest
+1 for context emphasis. Should be the ultimate unwind to watch perhaps chart it against physical gold as an inverse indicator....the herd's gotta go somewhere.
"On a long enough timeline the stock price for Apple will drop..."
All kidding aside Reggie, your analysis is topnotch. I think with Apple you are a little blinded by the institutional need/requirement for blue chips in a world where there are so few choices and Apple is the retail tech's opiate of the masses outstripping all competitors for good reason. Ironically, in these days of bank corruption and ponzi their product sales numbers is retail equities' 'gold in the vault'.
Herd behavior. The institutional herd has piled into Apple. Can't be many hedge firms left to still jump in. Will be interesting when the herd moves out of Apple.