Every December most reporters across Canada engage in a vicious and gut-wrenching ritual: Looking backwards at the last 12 months so they can predict events of the next 12.
My track record on this has been particularly undistinguished so I dare you to read on:
2. RIM’s future will still be cloudy
As I write this, Canadian business pages are dominated by headlines about handset makers: “Apple stock sinking,” and “RIM stock rallying.”
At first blush, they are connected – both are about smart phone manufacturers.
But the truth is these are companies in different universes, as they were in 2012 and will continue to be in 2013. The question is, does RIM have control over its future? I don’t think so.
Apple undoubtedly does. Its biggest problem is that sales aren’t as good as brokers think they ought to be.
Horrors!! One analyst has cut his 2013 price target to $700 from $780 (as of Dec. 14 it was $509).
Horrors!! One analyst thinks in the first quarter iPhone sales will only be 48 million and not 52 million. That’s 48 million handsets over three months. (In its most recent quarter RIM sold 7.4 million BlackBerrys.)
So let’s not lose any sleep over Apple CEO Tim Cook’s troubles. If he wants to pump up sales, all he has to do is cut reasonable terms with carriers. Negotiations have been dragging on for four years with China’s biggest carrier? There’s a solution for that.
RIM, on the other hand, faces a different set of problems for brokers: How well will the make-or-break BlackBerry 10 sell? A few months ago, when BB10 devices were a dream, financial analysts were pessimistic. Now, after talking to customers and developers, some are having second thoughts. That’s propelling some risk-takers to bid up the stock.
However, the real question is what’s the end game? If RIM stock goes up a few bucks and someone still buys the company to strip it of its assets, who wins? Because RIM is still at the point where shareholders, not sales, control its future. Where’s the point at which RIM stock goes up enough that predators give up?
Presumably they gave up a while ago – the idea of taking apart the company lost its appeal or it would have happened already. But it still could be taken over.
As several commentators have written, CEO Thorsten Heins has stabilized RIM in the last few months, issuing a firm release date for BB10 (depending on carriers) and not promising more than he can deliver.
This Thursday (Dec. 20) more bad news will be unveiled when its third quarter results will be released, and the Q4 results out March 28, 2013 for the period ending March 1. These last won’t include much in the way of BB10 sales. So the real signals of the new platform’s success won’t be seen until the summer, and sustained evidence until the end of the year.
Could BB10 boost quarterly sales to, say, 10 million a quarter? Unlikely -- that means sales up one-third. No analyst foresees that.
Pretend things go well and RIM stock goes from the present $14 a share to, say $25. Does success mean it’s more likely to continue as an independent company, or more likely to be bought by a competitor? Everyone thinks of Samsung wanting to buy RIM to solidify enterprise sales to organizations that don’t trust an Android-based Galaxy S III. But would Samsung have an interest in expanding or limiting RIM’s availability to their other target market – consumers who want advanced handsets?
Perhaps China’s ZTE Corp., looking to move beyond low-end Android handsets and to burnish an image tarred by the U.S. Congress for being too close to the Chinese government? But Android is the leading global mobile handset platform. How many resources would ZTE want to put into RIM?
An alternative, of course, is that competitors would merely licence BB10. But would that cause a dramatic increase in platform share and stock price? I think not.
By the end of 2013 RIM’s future will still be unclear.
An optimist would say that means Thorsten Heins will have won.