Research In Motion's crummy streak continues

A 3-day BlackBerry outage is just another stumble for the tech world's Inspector Clouseau.

By InvestorPlace Oct 13, 2011 2:22PM
By Tom Taulli, InvestorPlace.com

It's hard to believe that just a few years ago shares of Research In Motion (RIMM) were trading at $144. Now they are at a miserable $23.


It's easy to point at the dominance of Apple's (AAPL) iPhone and iPad as reasons for the fall, but that is far from the whole story. The mobile industry as a whole is growing at hyperspeed, and numerous players are showing success, such as HTC, Samsung (SSNLF) and even Amazon (AMZN), whose Kindle Fire is gaining lots of traction.


In other words, RIM's problems are mostly self-made. And especially lately, the company has become the Inspector Clouseau of the tech world. The latest mega-blunder was this week's worldwide outage of RIM's BlackBerry service.


Running a massive communications infrastructure is no easy feat, but considering RIM's big value proposition is a claim to reliability, a three-day BlackBerry outage is unacceptable.


Unfortunately, this has been just one in a long line of serious stumbles for the company. Here's a look at some of the other problems that have plagued RIM:


Nothing cool. A few years ago, RIM showed with BlackBerry that it could create standout smartphones. But the latest models have not only been duds, they've also experienced a variety of delays.

A lack of innovation can send a tech company along a downward spiral. If your phones aren't connecting with consumers, it gets tougher to find developers to create new apps, and carriers are more likely to focus on other phones. And since 2009, RIM's global market share of smartphones has plunged from 20% to 11%.


Slowness. Tech companies don't necessarily need to be pioneers. Google (GOOG) wasn't the first search engine, and Apple didn't make the first smartphone or MP3 player. What tech companies need are good products -- and timing.

In the PlayBook tablet, RIM had neither. The company's tablet entry was widely panned, and in the latest quarter, only 200,000 units shipped. Research In Motion might have rushed its release. At the time of launch, the PlayBook had no native email system.


Weird behavior. During an interview with the BBC earlier in the year, RIM's co-CEO Mike Lazaridis abruptly left. He thought the questions weren't fair. If management cannot take criticism from outsiders -- let alone keep from buckling during a strong line of questioning -- do you think it listens to concerns from its own employees? Probably not. Which would make it difficult to change course.

Verdict. Trading at four times earnings, RIMM shares are dirt cheap. But tech companies can always get cheaper. Meanwhile, the competition is surging ahead, while it could take RIM a year or so to get any traction with latest new smartphones and tablets.

What about a buyout? For now, the possibility is probably helping support the stock. But while RIM's patent portfolio would be attractive, it is likely worth only a few billion dollars. Besides, the company's founders own about 11% of the outstanding stock, so at these low levels, there probably will be little motivation to sell out.


Tom Taulli is the author of All About Short Selling and All About Commodities. You can also find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.


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