RIM on the road to nowhere as Apple smashes sales records

Thorsten Heins, apprentice helmsman of the good ship "Floundering BlackBerry" may think he'll guide the vessel into clear blue water by following the orders of deposed Admirals Balsillie and Lazarides but the market doesn't like it at all. "Steady as she goes and stay on course they plotted" has so far resulted in RIM's share price falling by 10 per cent on Monday and a further five per cent yesterday.

Until comparatively recently (and after the collapse of Nortel Networks of course) RIM was Canada's most  valuable company, worth, at one time, some US$70 billion. Now it's worth less than $8 billion. A year ago it had $2 billion in ready cash, today it has $1 billion and falling. The company's share price has plummeted by 75 per cent in the past 12 months.

Meanwhile, Apple and Google are eating RIM's lunch, dinner and breakfast as the company loses its grip on the smartphone market it once called its own.

Last night Apple reported incredible quarterly figures that heavily underscore just how much of a fight RIM has on its hands. Apple sold 37 million iPhones AND 15.4 million iPads in just 12 weeks! This resulted in an astonishing quarterly net profit of US$13.06 billion. Apple's stock price soared by 12 per cent to $460.20 per share. That share price give Apple a market capitalisation of $429 billion and makes it the most valuable company on the face of the planet.

And as Apple gobbles-up market share, all its rivals suffer but RIM is now well-and truly stretched on the rack. The company's revenues fell markedly in Q2 and Q3 of 2011 while net income fell in Q1,Q2 and Q3. Figures for Q4 have still to be made public, but they are expected to show that the decline continues unabated.

In Q3 RIM's market share dropped to 16.6 per cent, it'll be less when the next set of figures are released - and yet Thorsten Heins is following his master's voices and proclaims that there is no need for any drastic changes.

That's not what analysts and investors are saying. For example, Charles Wolf, an analyst with Needham & Co says, "There was enormous pressure for the company to make a change but Jim and Mike wanted to make as little change as possible. What we have seen looks largely cosmetic.”

Meanwhile, Marty Wolf, the president of M&A advisory outfit Martin Wolf LLC, says, “People are voting with their feet. It's clear to me the company [RIM] can't stay independent. The longer the new CEO operates the business with the current mandate, the more value he will destroy.”

Elsewhere, Tim Long of BMO Capital Markets, opined, “We believe a management change is long overdue at RIM. However, we would have liked to see some talent infused from outside the company." Kevin Dede of Brigantine Advisors is even more blunt. He says, "First, Heins has been a member of RIM’s management team since 2007 and is clearly indoctrinated to the existing culture of the firm; and second, Heins views the company’s current strategies as appropriate adjustments in addressing RIM’s problems which may be enough to say that he is complacent as well as complicit in the current massive smartphone market share losses.”

RIM doesn't stand a snowball's chance in hell of ever recovering its position in the US market and will only improve its performance in other markets if the RIM board suddenly discovers that it has cojones and actually ousts Balsillie and Lazarides completely and utterly from the company. As long as they remain board members, and Mr. Lazarides continues to head-up the new "Innovation Committee" things will only get worse - as they are doing. Verdict on Thorsten Heins after five fraught days in post? So far, so bad.

 

2011 was the worst year in RIM's history. 2012 seems set to knock that that particular annus horribilis into a cocked hat.