Series 3 of 3: Forward Looking – Is RIM Stock a Potential Opportunity for Investors?
Is RIM (BBRY) Stock a Potential Opportunity for Investors? (Continuing from Series 2)
All eyes of course are on how well BB-10 is received. Analysts are divided on the future of the new device, with many raving about its features and believing that existing users will migrate wholesale. Still, there are others that hold that BBRY's efforts in BB-10 are too little too late to save the struggling former darling of Wall Street and Bay Street.
Investors will also do well to keep an eye on what the company's ongoing "strategic review" brings forward. Recent reports that Chinese firm Lenovo is actively considering making an offer for BBRY's hardware business, and lack of denial of that story by BBRY executives, casts a negative overhang on the stock, sending the stock down to a low of $16.33 on the NASDAQ on Jan 24 when the story broke. A move such as this could make corporate and government users (including U.S. President Obama) jump ship quickly!
The company has also not been very clear on what it plans to do about service revenues, hinting earlier that these could be dramatically reduced leading up to the BB-10 launch and even thereafter. What company executives can do to plug that hole is still unclear. Shareholders may have to brace themselves for several quarters of lower revenue, if the service revenue void isn't filled satisfactorily.
On a more positive note, news that BBRY is open to licensing its secure messaging services to other companies, including on competing iOS and Android platforms, bodes well for investors. Long considered a strong hold for BB-10, licensing secure messaging might be a great revenue booster in the near term, as well as a great strategy to continue to hold on to customers that have switched from BBRY's platform to its competitors.
The Third Wheel?
The undisputed king and crown prince of the U.S. Smartphone domains are still iOS (Apple) and Android (Samsung). However, the fight for third place is still wide open. Even though RIM's U.S. market share has plunged dramatically, from 40% in 2010, to 6.1% in 2011 and to just around 1.1% in 2012 (Source: kantarworldpanel.com), it has stubbornly managed to hold on to number 3 so far. But the research clearly shows Microsoft's Windows platform, currently in 4th place, inching forward ever so slowly.
If all the hype that has been made about the upcoming BB-10 is to be believed, as many analysts, Telco service providers and network carriers seem to believe it is, then shareholders will have yet another reason to hope that RIM (BBRY) can indeed hold on to its coveted 3rd spot and mount a spectacular comeback. In RIM's favor is the fact that, when Microsoft reported earnings last week, the numbers for Windows Phone clearly didn't impress analysts. Still, these are early days yet!
The Bottom Line
Given the analysis provided above, BBRY rates as a "HOLD" for now. This rating should be revised, either to a "BUY" or a "SELL", depending on how BB-10 performs.
(By Monty R. – MarketConsensus News Contributor)
Good luck in your investing. Let us know if you have any questions, comments or feedback,
MarketConsensus Stock Analysis Team
SERIES: Is RIM (BBRY) a Buy, Sell or Hold?