Research in Motion (RIMM, Financial) has been a controversial stock for the last 2 years. Historically, RIMM made a lot of money for investors from 2004 to 2008, but it has also evaporated billions of dollars of shareholders’ wealth since 2008. Here is RIMM’s stock chart in 10 years:
What a roller coaster! In 2004, RIMM’s stock price was around $10, and then it shot up to nearly $145 in June 2008. In those 4.5 years, it was a 14-bagger stock. Since then, its price has been fluctuating on the way down. In 2008, it was $80 billion company, and now the market capitalization is just around $3.7 billion, a destruction of more than $75 billion in shareholders’ wealth.
The shareholders’ wealth destruction is due to eroding competitive advantages of its mainstream products, Blackberry, in the smartphone market. The popularity of Apple’s (AAPL, Financial) iPhone and other smartphones running on Android system has replaced Blackberry growth. According to International Data Corporation (IDC), Android and iOS had 85% of all smartphones shipped in the second quarter of 2012, marking a new high for mobile operating systems from Google (GOOG, Financial) and Apple. The former leaders of the smartphone market including Blackberry and Symbian saw their market shares decline to below 5%. IDC commented: “BlackBerry, one of the pioneers and former leaders in the worldwide smartphone market, reached share levels not seen since the first quarter of 2009. BlackBerry has lost significant share to other operating systems in the consumer and enterprise segments. Now that RIM has delayed the release of new BlackBerry 10 smartphones out to 2013, BlackBerry remains vulnerable to the competition.”
However, there is always an opportunity in any crisis. Is RIMM a great opportunity for long-term investors? Many investment gurus are bullish on RIMM. Prem Watsa, Chairman and CEO of Fairfax Financial (FRFHF.PK), in Fairfax Financial Dinner in May, said that RIMM remained number 1 in many markets. It had $2.1 billion in cash and no debt. He thought Mike Lazaridis was a genius. He also likes Thorton Heins and he was happy to be RIMM’s shareholder. Francis Chou, from Chou Associates Management, claimed that RIMM’s patents alone were worth $13 per share. In addition, according to gurufocus.com, Donald Yacktman, Joel Greenblatt, John Burbank and John Keeley have been buying RIMM for their portfolios.
Yesterday, RIMM just reported a narrower loss than analysts’ projections. The positive outcome has come from the growth of Blackberry subscribers in overseas markets such as India, Indonesia and South Africa. Analysts expected that RIMM’s loss in the second quarter would be 47 cents on average, but it turned out to be only 27 cents. Blackberry’s subscribers are increasing from 78 billion to 80 billion globally. In Q2, revenue was $2.9 billion, a 2% increase from $2.8 billion in Q1. Operating cash flow was $432 million, and cash increased to $2.3 billion. An analyst of Veritas Investment Research commented that RIMM didn’t burn through cash, which was calming investors down. “Investors are thinking: Perhaps they have a chance to come back.” It seems that although RIMM lost its US market share to Apple’s iPhone and Google’s Android software, it could gain customers in lower income markets.
After the positive Q2’s operating result announcement, RIMM’s share price jumped more than 20% in aftermarket trading. It closed 27th September trading day at $7.14 per share. Currently, RIMM is trading at only 1.4x P/CF and 0.4x P/B. It is definitely the cheapest compared to Apple, Google and Nokia (NOK, Financial).
Investors who buy in RIMM might be opportunistic. RIMM has been widely considered as a liquidation or buyout play. Of course, nobody can time the market. I think at the current price, RIMM could be a good stock for long-term investors to hold and wait for good news of the buyout or improvement in RIMM’s business operating performance.
Dislosure: Long RIMM
What a roller coaster! In 2004, RIMM’s stock price was around $10, and then it shot up to nearly $145 in June 2008. In those 4.5 years, it was a 14-bagger stock. Since then, its price has been fluctuating on the way down. In 2008, it was $80 billion company, and now the market capitalization is just around $3.7 billion, a destruction of more than $75 billion in shareholders’ wealth.
The shareholders’ wealth destruction is due to eroding competitive advantages of its mainstream products, Blackberry, in the smartphone market. The popularity of Apple’s (AAPL, Financial) iPhone and other smartphones running on Android system has replaced Blackberry growth. According to International Data Corporation (IDC), Android and iOS had 85% of all smartphones shipped in the second quarter of 2012, marking a new high for mobile operating systems from Google (GOOG, Financial) and Apple. The former leaders of the smartphone market including Blackberry and Symbian saw their market shares decline to below 5%. IDC commented: “BlackBerry, one of the pioneers and former leaders in the worldwide smartphone market, reached share levels not seen since the first quarter of 2009. BlackBerry has lost significant share to other operating systems in the consumer and enterprise segments. Now that RIM has delayed the release of new BlackBerry 10 smartphones out to 2013, BlackBerry remains vulnerable to the competition.”
However, there is always an opportunity in any crisis. Is RIMM a great opportunity for long-term investors? Many investment gurus are bullish on RIMM. Prem Watsa, Chairman and CEO of Fairfax Financial (FRFHF.PK), in Fairfax Financial Dinner in May, said that RIMM remained number 1 in many markets. It had $2.1 billion in cash and no debt. He thought Mike Lazaridis was a genius. He also likes Thorton Heins and he was happy to be RIMM’s shareholder. Francis Chou, from Chou Associates Management, claimed that RIMM’s patents alone were worth $13 per share. In addition, according to gurufocus.com, Donald Yacktman, Joel Greenblatt, John Burbank and John Keeley have been buying RIMM for their portfolios.
Yesterday, RIMM just reported a narrower loss than analysts’ projections. The positive outcome has come from the growth of Blackberry subscribers in overseas markets such as India, Indonesia and South Africa. Analysts expected that RIMM’s loss in the second quarter would be 47 cents on average, but it turned out to be only 27 cents. Blackberry’s subscribers are increasing from 78 billion to 80 billion globally. In Q2, revenue was $2.9 billion, a 2% increase from $2.8 billion in Q1. Operating cash flow was $432 million, and cash increased to $2.3 billion. An analyst of Veritas Investment Research commented that RIMM didn’t burn through cash, which was calming investors down. “Investors are thinking: Perhaps they have a chance to come back.” It seems that although RIMM lost its US market share to Apple’s iPhone and Google’s Android software, it could gain customers in lower income markets.
After the positive Q2’s operating result announcement, RIMM’s share price jumped more than 20% in aftermarket trading. It closed 27th September trading day at $7.14 per share. Currently, RIMM is trading at only 1.4x P/CF and 0.4x P/B. It is definitely the cheapest compared to Apple, Google and Nokia (NOK, Financial).
| Valuations | P/CF | P/B | P/E |
| RIMM | 1.4 | 0.4 | N/A |
| AAPL | 12.3 | 5.7 | 16 |
| GOOG | 15.7 | 3.8 | 22.3 |
| NOK | 7.7 | 0.9 | N/A |
Investors who buy in RIMM might be opportunistic. RIMM has been widely considered as a liquidation or buyout play. Of course, nobody can time the market. I think at the current price, RIMM could be a good stock for long-term investors to hold and wait for good news of the buyout or improvement in RIMM’s business operating performance.
Dislosure: Long RIMM
