This morning, Louis Basenese pointed out that the latest investor sentiment indicates that the markets should continue to ramp up in the foreseeable future. And he encouraged you to act while stocks are still cheap…
For the record, I agree 100% with his advice.
But as you know, some stocks aren’t worthy of your attention no matter how cheap they are.
Case in point: Here’s one company I wouldn’t go anywhere near right now, even though shares are trading at levels not seen since 2004: Research In Motion (Nasdaq: RIMM).
It’s no secret that RIM has had quite a tough go of it lately.
The company – once celebrated for pioneering wireless email with its BlackBerry smartphone and its popularity with enterprise and government organizations – is now floundering from its inability to keep up with the increasingly competitive mobile landscape.
For instance, tablet ownership nearly doubled during the holiday season, according to Pew Research. But it’s unlikely that RIM had anything to do with it, considering its PlayBook tablet has failed to impress consumers and corporate clients alike.
As its smartphone market share continues to plummet, Google (Nasdaq: GOOG) and Apple’s (Nasdaq: AAPL) reach continues to spread. They’re dominating 46% and 44% of the market, respectively. While RIM’s hold over the space has dropped from 44% in the United States in 2009 to just 10% in 2011.
And don’t forget the massive data outage in October that left BlackBerry customers throughout the world without wireless connectivity for days.
Needless to say, RIM has been in need of a change for some time now. And I’m sure investors thought that the resignation of co-CEOs, Mike Lazaridis and Jim Balsillie, on Saturday would have been the shakeup they were looking for.
That is, until the new CEO made his first appearance…
Ignorance is Bliss
The company’s former Chief Operating Officer, Thorsten Heins, officially took the reins yesterday and he offered some insights about the company’s coming direction with him at the helm.
So what can investors expect from the new leader? Based on his inability to admit many of the company’s shortcomings, my guess is a lot of what we saw before.
To illustrate my point, here are a couple quotes taken from a conference call and video interview, and why they don’t add up (emphasis added):
“At the very core of RIM… is the innovation. We always think ahead. We always think forward. We sometimes think the unthinkable… We have taken [BlackBerry] to totally new heights… If we continue doing well, what we’re doing, I see no problems with us being in the top three players worldwide.”
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Not only has RIM failed to innovate in the smartphone and tablet industry, it’s struggled just to keep up with the competition. This holds true even when it comes to standard features like email – something the PlayBook still doesn’t have natively, nine months after the tablet hit the market!
And that line about becoming one of the world’s top three players by simply continuing “what we’re doing?” One look at RIM’s tumbling market share is all it takes to see the hilarity of that statement.
But Heins insists that RIM still has a strong following…
“We have a strong customer base today both in corporate enterprise and in consumers… Our enterprise customers mean a lot to us and we want to continue that. That’s a very strong fortress that we own.”
Sorry, but the company’s enterprise “fortress” isn’t as fortified as he claims – by all appearances, the drawbridge is lowered, the moat is drained and the militia is out to lunch.
Consider the Check Point survey this month of IT workers in the United States, United Kingdom, Canada, Germany and Japan. It indicates that the iPhone has surpassed BlackBerry as the preferred enterprise platform. A leading 30% of them reported that they had an Apple device connected to a corporate network – Blackberry followed at a close but slipping 29%.
Enough Sugarcoating Already
What he needs to realize is that RIM investors seem to respond better when the company takes action that adapts to the current mobile industry, rather than avoiding it entirely.
Like when the company announced its new software program, BlackBerry Mobile Fusion, which helps IT departments manage all smartphones owned by employees, including iPhones and Android phones.
It was an intelligent solution to the uptick in enterprise employees using smartphones outside of BlackBerry, and the company’s shares jumped by double digits.
Granted, the rally was short-lived. But the stock’s 8.5% drop yesterday – and continued decline today – shows that investors do not react well to blatant denial.
As Morgan Stanley (NYSE: MS) analyst, Ehud Gelblum, says:
“People may have been a little disheartened that he was defending the current RIM strategy… I think [investors] might have wanted to hear a mea culpa.”
To his credit, Heins did manage to point out a few areas in need of improvement. Like the need to “get better at execution… more disciplined in our own processes… [and] have a little bit more of an ear toward the consumer.”
All valid points, albeit a little weak. But until he fully recognizes the sad state of the company, don’t expect investors to buy in.