Recently, Research In Motion announced that it would introduce a Blackberry 10 version at the end of January 2013. Blackberry 10 will be the operating system for its own new smartphone. Actually Blackberry 10 was planned to be released in late 2012, but it was delayed because of a “large volume of incoming code,” and “not related to quality or functionality.” Could the new Blackberry 10 regain users’ preferences in the mobile market? And could RIMM regain investors’ confidence in the future?
According to Mark Hachman of pcmag.com, Blackberry 10 had 6 intriguing features including Blackberry Hub for improved messages, Blackberry flow for a better user experience, time shift application to choose the best picture among multiple shots, keyboard suggesting words for better typing, Blackberry balance to firewall data between work and personal uses, and Federal Information Processing Standard (FIPS) 140-2 certification for government agencies usages.
Among those 6 features, Blackberry balance and FIPS seem to be the most outstanding. Work data and personal data could be firewalled. Users could erase all of the work data without affecting personal data. In addition, it is glad to see that Blackberry sticks to its core competence with its unmatched security system. When the Blackberry Playbook was first released, it was the first one to be certified by the US and the Australian governments. Now the Blackberry 10 won FIPS the first time before the launch. This certification proved that the product could be used by US government agencies to transfer and share sensitive information. Personally, I think people choose Blackberry mainly because of its top security system, not because of its user friendliness. CEO Thorsten Heins is quite optimistic about the new platform: “In the last week, BlackBerry 10 achieved Lab Entry with more than 50 carriers - a key step in our preparedness for the launch of BlackBerry 10 in the first quarter of 2013… have spent the last several weeks on the road visiting with carrier partners around the world to show them the BlackBerry 10 platform and to share with them our plans for launch. Their response has been tremendous. They are excited about the prospect of launching BlackBerry 10 in their markets.” The CEO really hopes to turn RIMM around with this new platform and the new device running on it.
Users have waited for quite a long time for a breakthrough Blackberry product from RIMM. In contrast, its biggest competitor, Apple , with the newly launched iPhone 5, has kept refreshing itself with continuous releases of new products such as iPad 4, iPad mini. Additionally, the rumor of producing iPhone 5s is spreading widely. Another competitor, Nokia seems to make its way back strong in the US mobile market. Its Lumia device is partnering with three biggest mobile operators in the US including AT&T, Verizon and T-Mobile for exclusive Lumias sales. Sprint has not decided on Lumia but it said it had plans for Windows Phone 8 platform for the next year. Indeed, there is a tough competition out there in the market.
However, the Canadian Warren Buffett, Prem Watsa, showed his confidence in RIMM by loading up on more RIM shares in the third quarter 2012. He now owns more than 51.8 million shares, with a total value of more than $390 million. RIMM becomes his second biggest position, accounting for more than 21% of his total portfolio. Other value investor, Donald Yacktman, added more shares in the recent quarter as well. He owns nearly 23.5 million shares, with a total value of $176 million.
Currently, RIMM is trading at $9.97 per share; the total market capitalization is $5.22 billion. It is even less than 1% of what Apple is worth in the market right now. The market is valuing RIMM at only 0.5x book value. Apple is trading at nearly $550 per share, with the total market capitalization of more than $514 billion. It was more than 28% off from its high of $700 in September. Apple is still a value play with 12.3x P/E and 4.3x P/B. Nokia is trading at $3 per share, with the total market capitalization of $11.5 billion. The market is valuing Nokia at 1.1x P/B.
My Foolish Take
RIMM is an opportunistic play for me. If Blackberry 10 takes off, the company can fly high. Otherwise, I think its other bigger peers would buy RIMM for a good premium on the current market price. Apple is a pure value play, with a decent balance sheet, great earnings and free cash flow growth. It is valued cheaply in the stock market with only 12.3 P/E and 0.5x PEG. Investors might consider both stocks in the portfolio, however, for different reasons. For Nokia, even with the partnership with mobile carriers, I would rather stay out and watch to see how Lumia deliver for the company.