Is the BlackBerry nearly obsolete?

Technology is all about staying ahead of the game, and Research In Motion is losing the battle. Plus: The market is still frightened by the Fed's shadow.

By Bill_Fleckenstein Apr 6, 2012 11:00AM

A Blackberry phone shown at a developer's conference. / (c) Jeff Chiu/API had to chuckle recently when I saw that Research In Motion (RIMM) missed its earnings estimate yet again and is no longer going to be issuing earnings guidance. In addition, the company's founder and former CEO, Jim Balsillie, has stepped down from the board.

 

Longtime readers may remember the battles I had with RIMM, a company I viewed as just a commodity masquerading as something unique. Of course, I don't know if it was doing the masquerading so much as wild-eyed stock bulls couldn't recognize Research In Motion for what it was, just as they were blind to problems at other companies that I and others of like mind have taken to task, such as Gateway Computer and Iomega.

 

Just for grins, I went back and looked at a column I posted on my subscription site on June 26, 2008, when the BlackBerry smartphone maker was trading at around $135 a share. (Back then, for those who don't recall, Research In Motion was one of Jim Cramer's supposed "Four Horsemen" that were supposed to carry the market higher.)

 

At the time I wrote, "Not only is (RIMM's) product becoming more of a consumer item (witness their crowing about consumers comprising about 60% of their phones), but the businesses where RIMM has the most penetration are in trouble. Further, serious competition continues to escalate. As I have said all along, I don't see how a closed system like RIMM ultimately wins, as that never happens in technology. . . . The fact that RIMM finally floundered says to me that it is over for the stock."


Column continues below.

To be fair, I had thought it was over for Research In Motion on a couple of previous occasions. But in this case, it was.

 

Out with the new, in with the newer

The reason I bring this up is because folks often forget that technology is a game of obsolescence that requires spending a lot of money, and it is very difficult to build a barrier to entry. Microsoft (MSFT) has a rather large competitive barrier, but that didn't stop its stock from selling at 10 times earnings last year. (Microsoft publishes MSN Money.) Google (GOOG) has a pretty good-sized barrier to entry, but many tech companies don't.

 

Apple (AAPL) has a bit of a barrier to entry in its iPod business, but in its other businesses, it really doesn't. Although I did try to take some of the bloom off the Apple rose in my column from two weeks ago, "Is it time to be against Apple?"

 

My point today is not that Apple is RIMM or that I am betting for or against Apple with any investments or trades at the moment. I just think it is useful for readers and investors to see where problems may come from.

 

Again, I want to be clear: I don't think that Apple is as vulnerable as RIMM was, because clearly it isn't. But it could stumble, as today's hot consumer item turns cold down the road. The moral of the story is that, oftentimes, products are just commodities. They are not the unique items people think they are.

 

Rational compared to what?

Turning to this week's action, Wednesday's swoon in particular, on the release of the Federal Open Market Committee's meeting minutes, found me looking at my screens and marveling at how simply mind-boggling it is that multitrillion-dollar stock markets worldwide, supposedly full of millions of sophisticated investors, can behave as idiotically as they do.

 

Our market, for example, ignores any and all bad news, is particularly uncritical of good news (such as weather-boosted activity in the gross domestic product), then dies of fright because the Federal Reserve reiterates what it said a month ago -- i.e., that it is not inclined to take any more easy-money action until it sees more signs of weakening.

 

Of course, that is now exactly what equities and the economic data are most likely going to provide, allowing the Fed to get back to doing what it does: print money.

 

Scrambled Eccles

It is sheer folly that we have markets and economies that totally revolve around what the "politburo" of the Fed's interest-rate-setting committee (and other central bankers) decides. It is incredible what an all-paper dollar and the lunatics at the Fed, in the form of Alan Greenspan and Ben Bernanke, have created.

 

Meanwhile, it is almost comical that so much attention is focused on presidential races when the morons at the Fed have all the power, yet are left unchecked to do trillions of dollars' worth of damage and ruin lives as they warp the economy and financial markets.

 

The reason markets are the theater of the absurd is because fiat money is no better than confetti, and all kinds of bizarre events take place when money means nothing. This makes the stock market somewhat uninvestible, even though there are plenty of equities that aren't very expensive. Of course, there are pockets of lunacy -- largely momentum favorites, i.e., the so-called "social networking" sector.

 

It is likewise amazing that a company such as Apple has such cultlike admiration that idiot analysts' price-target upgrades are treated as legitimate news items. To be sure, this is the environment we've been in for a long time, and the one we must deal with. But occasionally events conspire to make it seem so absurd that it provokes a rant like this one.

 

Everything to be gained

One of the potential positives from the pending potential stock market selloff is that we will see how high bonds can rally. Perhaps the bond market is going to have a failed rally somewhere along the way that will be instructive and allow us to get our teeth into the idea that a bear market has begun.

 

After all, that is what we are going to need to eventually get rid of the Fed and establish some sort of sane monetary standard in this country. We need inflation and a bear market in bonds, which will also weaken the dollar, all of which will help people come to the realization that the Fed is the problem. We can only hope we get there sooner rather than later so that the insanity will end.

 

On the air

For my latest interview with Eric King, regarding stocks, the Fed, and the metals market, interested readers can listen in here.

 

At the time of publication, Bill Fleckenstein owned stock in Microsoft.

43Comments
Apr 8, 2012 1:06AM
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I'll stick to my old flip phone. I don't live my life attached to a device outside of work, and I refuse to. It's not healthy. I think a majority of people are persuaded to feel that they 'need' these devices-we don't NEED them! I see people constantly talking on them, texting, watching movies, playing games, etc. etc. they even walk around with their eyes glued to them while walking down the sidewalk! It's disturbing to me.
Apr 6, 2012 8:58PM
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Blackberry's a class act. Hope they still keep making them for grown-ups.
Apr 9, 2012 1:05PM
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I don't use my phone for much. In fact, I hate having a phone sometimes. I have no use for "social media" as I don't care much to see anyone's vacation photos or just goofy pictures of them hanging out. If I haven't  talked to you in 15 years, there's probably a reason. Texting is the return of the telegraph. I send about 100 a month. Tweeting....really? I don't care if there's corn in your BM or that you just had a nice salad(with corn). Who has time for all this stuff? In my spare time, I go do something outside usually without my phone. Maybe you should too.
Apr 6, 2012 10:57PM
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I am not an Apple fan. I got into PC's with DOS before there were windows. Peter Norton taught me with his book DOS 6.2. I have always felt that Apple made people a little lazy. We must run PC's in this business. The new hires who have been exposed to Apple in high school are lost. I am not lookin' to start a fight here, that's all I'm sayin'! 
Apr 6, 2012 10:20PM
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 I thought being tied to a pager was bad. But Smartphones and I-pads are even worse. Now we can be traced, spied upon and located with the new generation phones. Next we shall be offered brain implants with network access. And the prices are outrageous. Is it really worth it to be "cool"?

 

Apr 6, 2012 11:33PM
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Wow. TWO hit jobs on Blackberry coming from MSN Money in two days. Yesterday it was about how RIM is being bailed out by Obama, (which is NOT AT ALL what the article said, but more what a bunch of people who didn't read it screamed like idiots) and TODAY it's this. These attacks seem coordinated. 
 
What this article and yesterday's article fail to point out is that this is a company that is STILL making MONEY. LOTS of money. ALL over the WORLD, except for the USA. What both articles fail to point out is that RIM KNOWS there's a problem. THAT'S why there is a new CEO, THAT'S why they are shaking it up, and THAT'S ALSO why they have brought on some major developers. 
 
What both articles fail to mention is that RIM is CLEARLY taking actions to correct these perceived problems. This is why I think these articles are coordinated attacks. There is no mention of the GOOD things that are happening, only the bad of the past. It's transparent, and we're on to you, MSN Money. 
Apr 8, 2012 8:59PM
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"Is the BlackBerry nearly obsolete?"

No.  Mine seems to work just fine for the things I use it for.

What's the media rush to kill it??  Who's being paid to speed the demise and by whom?
Apr 6, 2012 11:49PM
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Old Jim Cramer. Why do people listen to this clown?

 

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Blackberry's a class act. Hope they still keep making them for grown-ups. It has some skills better than ipone.
Apr 9, 2012 9:47AM
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Well, is this an article on companies or as it appears to me to be a ' HI, I am great'  because I predicted
just how great I am??? Oh by the way RIM and others are in the s...!
Apr 9, 2012 6:04AM
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Being a former crypto guy I absolutely love BB & RIM (not RIMM) The BB encryption algorhythm is the best. Thats why the US Government uses it.  NSA has a standing reward fo the BB encryption system
Apr 9, 2012 9:15AM
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Well if RIMM is doomed because it is a closed system then one can only assume that ultimately the same fate will befall Apple if it doesn't change its model.  Considering that Apple was once looking like a dead man walking for many of the same reasons that might not be so far fetched.  In the end those who try too hard to hoard and control technology will be left behind. 
Apr 9, 2012 1:04PM
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This article is nothing new.  2 years ago, BB was losing it's appeal. (Never liked them).  The writer is doing nothing more than just repeating an I-Told-You-So over and over and over again in this story.  Way to go you pompous wanker!
Apr 9, 2012 9:14AM
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Conspiracy here. It all an coordinated attack to drive to the stock price downward so the shorts can profit. RIMM should keep on doing what they are doing. Their next platform and new phones will set a new standard. QNX is bullet proof. It will be what all business, governments  and people who are serious about their work will want.. RIMM is far from dead. Buy now or be sorry later. (RIMM)

Apr 8, 2012 12:38PM
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Why not sell Blackbeery to China and send Kramer with the package to sweeten up the deal?
Apr 6, 2012 9:09PM
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Why are smart phones needed?  I get email and access the internet on my phone already. What does a smart phone do that mine doesn't?  I was waiting for Blackberry to be affordable.  I have never owned, or even laid my hands upon, an Apple product.  I have been using PC's since the early 80's.
Apr 9, 2012 10:21AM
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When Bretton Woods went out of the window, so did sane monetary policy

 

A financial oligarchy has run this country for quite a while

Apr 7, 2012 12:04AM
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Well at least when the BlackBerry dies, my employer will be forced to get us those nice Androids. Smile 

Apr 9, 2012 9:25AM
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What we fail to remember is the iphone and IPAD is being made in a different county and they sale it in the US for 10 time what it is worth.  yes the blackberry is becoming obsolete if they don't change. It has the highest sat rating but it doesn't come with insurance and everytime something happens to the phone you either have to buy a new one or hope you can get another one though craigs list or ebay.

 

I have an IPHONE  and it is said that it doesn't have insurance on it from the company that sells it.

The IPHONE is just like starbucks coffee, How can one person get people to pay 6 to 8 dollars for a cup of coffee.  Same with an Apple IPHONE. unlock IPHONE now 600 to 700 dollars. It is not even worth that But we as americans will continue to buy it and they are coming out with a new phone almost every year how stupid are we.  Blackberry is the only phone you can secure you can't secure an IPHONE without  voiding an agreement. yes they got us! and they got us good.

Apr 9, 2012 1:57PM
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Blackberries have a good place in Business with the Enterprise Servers adding the level of security and control for IT personnel. iPhones and Androids need very careful permissions in an enterprise environment with Exchange. Not to mention they're always connecting to Wi-Fi and then the cloud debacle that was sucking major bandwidth usage. Not sure if anyone remembers the other player Palm, the Treo and Brightmail? Where are they now? Dead that's where. I think one major screw up was RIMM introducing a tablet that needed to be tethered for email… Big Mistake! hopefully they get cooler phones and this new OS will put them back. It may be their last chance.

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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.

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