Research in Motion

RIMM (Nasdaq: RIMM) is down to lows not seen in a long, long time. They closed today at US$9.11/share.

The story is fairly well-known: they’re getting cleaned out by Apple and Google/Android. It is frighteningly similar to Nokia in nature, where a technology giant becomes obsolete in short order by failing to catch up. The one moat to their business, a secure email and messaging system, seems to be eroding. As a result, they are losing the game in the corporate world, and when this occurs, it is pretty much lights out for RIMM. Or is it?

I haven’t been tracking the technology and I believe somebody would intuitively have to be keeping their knowledge updated of the upcoming technology trends in order to make an informed call on that front. Since my cell phone is considered to be barely functional in today’s terms, I am not that person. All I can do is read their financial statements, but while they historically have been quite profitable, it appears that the market is indicating otherwise. For example, look no further than analyst estimates, as compiled by Yahoo Finance:

Without knowing anything, my advice to any potential investor in RIMM would be to hold back until that February 2014 estimate is deeply negative.

RIMM has about $1.8 billion in the bank without any debt, so they do have some maneuvering room for research and development. I have no idea whether Blackberry 10 will actually be a competitive product or not, but clearly the market is not thinking so. If you believe the market is wrong, wait until those estimates go even lower and overreach on the downside – then invest. Today’s analyst report from Morgan Stanley that downgraded the company to a sell and called for its break-up was one more piling onto the bad news sentiment. Will there be more?

A fairly interesting tidbit is that Prem Watsa, from Fairfax Financial (TSX: FFH) fame is recently on the board of RIMM and Fairfax has 26,848,500 shares of RIMM, a position that is now deeply underwater.

3 thoughts on “Research in Motion”

  1. I’m too cowardly to speculate with RIM.
    For fellow cowards: I have just started to buy Safeway (SWY) under $17 (entry position), and plan to buy more, if it gets cheaper. I lucked out last year, when I noticed it was trading a little over $16. The stock hadn’t traded that cheaply, even during the 2008/09 market meltdown. I traded out of that position, and have just started to buy the stock again, with the same intention.
    It pays a 4% dividend, however, some gets clawed away from Canadians, by Uncle Sam.
    For full disclosure, I live in Western Canada, and I don’t particularly like shopping at Safeway.

  2. If you stick it in your RRSP that 15% withholding will not be present.

    I can see why a value investor would be intrigued by SWY, but I am equally as uncomfortable with the leverage and the BOD still buying back shares when they should probably take the foot off the gas pedal a bit.

    Incidentially most of my own retail grocery shopping is done at Superstore (Loblaws, TSX: L). I find Safeway too expensive, although I will note the quality of some of their bakery products I am impressed with (which Superstore is slowly encroaching into with artisan-type breads).

  3. Nokia and RIMM are not comparable. There needs to be a low end cheap phone. It’s not RIMM. Could be Nokia. Market is calling it Samsung right now. Time will tell.

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