- 1. Deliver on several new very competitive handsets in late August,many of which include the best keyboard ever made on a handset ;
- 2. Deliver on attractive native applications for the PlayBook tablet by August ;
- 3. Deliver on the Android app compatibility for the PlayBook during the second half of 2011 ;
- 4. Deliver on WiMax, LTE and HSPA versions of the PlayBook in various stages between August and November ;
- 5. Deliver on 10-inch versions of the PlayBook in the December-February time frame ;
- 6. Deliver on a whole new generation of smartphones some time in thefirst half of calendar year 2012, based on the QNX operating system running on multi-core processors. Just like the PlayBook starting in the second half of 2011, all of these smartphones will be able to run Android apps .
NEW YORK ( TheStreet) -- The stock sentiment and recent performance for Research In Motion ( RIMM)is terrible, with the stock retreating back to where it was in early 2009, and before then, in late 2006. At least the stock is well ahead of its $2 level in 2003. RIM shares are down primarily because investors believe that the company's products are losing market share, and that the situation is beginning to look like what happened to Nokia ( NOK) starting four to eight years ago. As a result, the analyst consensus is now materially below the per-share earnings guidance of $7.50, and almost every analyst has downgraded the stock and his price target dramatically. There's no doubt that RIM is having problems. RIM is several quarters late in introducing its new handsets based on its 7.0 operating system. For every day that passes until the new BlackBerry models become available, RIM is losing sales, all other things equal across all geographies. Adding insult to injury, RIM's PlayBook tablet has probably not sold well enough to have a meaningfully positive impact on the May quarter's results. The PlayBook was released in April, well before the interesting new software capabilities are made available in the August-September time frame. Despite these drawbacks, however, the situation at RIM is not as bad as it is at Nokia. Why? Let's first recap the situation at Nokia. I'm unaware of a single geography and market segment where Nokia is gaining share or sales. Nokia has close to zero market share in the U.S., and it is losing toevery single kind of competitor in Asia, Europe, Africa and the Americas. In contrast, RIM is losing market share in only a small number of countries, primarily the U.S. In the vast majority of 175 or so countries, RIM is eating Nokia's lunch. If RIM fails to deliver quickly on its new products, this situation won't continue forever. But for now this remains directionally true in RIM's favor. The BlackBerry is relatively more attractive in many countries outside the U.S. for a few reasons, including the data efficiency, lower service plan cost, and higher optimization for text messages. Again, these advantages will whittle over time, but they don't disappear in a couple of quarters or even a year or two.
In the U.S., wireless broadband is widely available and cheap. This speaks to the advantages held by Google's ( GOOG) Android and Apple ( AAPL) iPhone platforms, as they tend to consume a lot more data. Then add the fact that U.S. consumers are coming from PC ownership in which users are trying to replicate their PC experiences. In contrast, many consumers in Asia, Africa, Latin America and even Eastern Europe have never used a PC; they are upgrading from using SMS on a Nokia, not trying to shrink a PC into the hand. As a result, it makes a lot of sense for them to upgrade from Nokia to a BlackBerry. So what does all of this mean? It means that whereas Nokia is losing on every conceivable front, RIM is losing only on a couple of fronts -- principally in the U.S. This is giving RIM breathing room for the time being, but this air pocket will not last forever. Until RIM delivers on its new smartphones in late August, it faces relative decline. But it should continue to see relatively impressive absolute growth in its business, on a year-over-year basis. What is RIM's plan for preventing what would otherwise be its demisein the coming years? There are six steps RIM is preparing to takeover the next seven to 12 months:
But what will be the right way to value RIM in a more baseline scenario, all again based on RIM delivering on the six major milestones outlines here? In such a baseline scenario, RIM should be valued like any licensee of Android or Microsoft ( MSFT) Mobile, in other words like Motorola Mobility ( MMI), HTC or for that matter Nokia. RIM's smartphones, starting within a year from now, and tablets starting already this year, will run Android apps. This is the ultimate backstop for RIM's valuation. Basically, unless RIM is incapable of delivering on the announced milestones on time, RIMshould settle into being a 15%+ grower trading at worst at a multiple of half of that. So let's say 7x EPS of $7, which is $49. Then add some cash. What this means is that unless RIM simply fails to execute on time on the already outlined basics, there is no way RIM should be trading below $50, and more likely somewhere significantly above that. (I suggest $100 as the potential as long as Apple's multiple remains solow as it is today). So what are the pundits and analysts failing to see regarding RIM? In summary, there are two things: 1. The smartphone market outside the U.S. and a small number of othercountries and cities, looks a lot different than life in New York and San Francisco. This means RIM will continue to gain against Nokia for at least another two to four quarters. 2. As a baseline scenario, RIM looks just like a Android or Microsoft licensee, which means its valuation will resemble Motorola Mobility, HTC and Nokia. It is currently trading at a huge discount to those companies. What will be the timing of RIM's stock to start climbing back to at least the $50 level? In my view, it all comes down to RIM delivering on the six milestones described. This would mean an upward move starting soon, and completing in about a year. If RIM cannot deliver on these six milestones, or can't do so on time, expect acommensurate delay and shortfall. Bottom line for the stock: The bottom for RIM looks likely to happen some time in the June-August time frame. At the time of publication, Wahlman was long AAPL, GOOG and RIMM.