Doubting RIM: Time to Do a Pair Trade With Apple?

I suspect that, most days, I make errors in judgment of some form or another. Rarely do they hurt, fortunately, and we all hope to learn from previous mistakes. Like the time I made a U-turn on Wellington Street in 1991 without first looking; a Korean-made sedan hurled into my front left quarter panel and looked much the worse for wear after the encounter with my Pathfinder. I lost little more than a turning signal, but his repair bill wasn’t small. His front and rear doors were smashed in. Haven’t made that mistake again.

A few weeks ago Fabrice Taylor sounded the alarm about the state of the world at Research In Motion (RIMM). He was focused on weakening gross margins, and wondered why RIM continued to spend so much on R&D and so forth. As a long time RIM fan and shareholder, I read the piece with care and wondered if there was anything in the analysis that should cause me to jump for the exits.

Despite the positive reports from Equity Research Analysts, and growing earnings, one can’t ignore the fact that RIM shares are almost flat on a 1 year basis, and down more than 30% on a 2 year review. For a buy and hold investor, you’ve got to have held RIM since June 2007 to have made any meaningful money.

Having sold RIM (at a profit) two or three times over the past 8 years, I can tell you that I had vowed to never sell it — ever again. I was forever having to buy it back at higher prices later. Trading it is different, as there are just so many opportunities each year to do just that. But exiting completely? Never works.

Inertia has prevailed for now, but at least it was considered inertia.

And yet the new RIM print advertising campaign is giving me butterflies. Hiring U2 to front the product a few months ago seemed sensible enough: Want access to consumers? Get one of the best consumer brands in the world. Besides, Jimmy’s a fan of the rock world.

Of late, though, the online world is replete with RIM advertising. Maybe I hang around their target sites (NYT, for example), so that in and of itself shouldn’t be a concern. But, the penny dropped for me today when RIM ran two full page ads in the front section of the Globe & Mail; home of the very same Fabrice Taylor. The very paper that, just a few years ago, unfairly questioned the charitable bonafides of RIM’s Co-CEOs.

This can’t be a good sign for shareholders. Not that RIM has made peace (the industrial league hockey story was the initial white flag), but that RIM thinks there’s a single adult reader of the Globe who hasn’t heard of the company, its product, or what it’s like to be connected to the world via wireless email.

This can’t bode well for momentum in the consumer market, can it?

I know that smartphone penetration still has a huge amount of room to grow, and RIM will soak up volume without needing a new “Gaga” device; but perhaps it is time to do the pair trade of RIM and Apple (AAPL). Might be time to throw in the towel on this solo strategy; why pick between the two? Just own both.

Disclosure - I own RIM

Comments

[JamesApple:]

Neither Rim nor Globe and Mail can even find takers for their wares nowadays. People don't subscribe to newspapers nor do they wanna touch anything BOGOberrys, it's like they got diseases.

Biz is so bad for Rim you can make U turns all day on King Street West and Columbus Street in Waterllo all day with a Greyhound coach and not hit or get hit by any traffic. Waterloo is a ghost town.

Rim had always been a iPhone wannabe but too bad the Rim Storm got stormed under and the Storm 2 looks like it had been hurricaned. Rim had long been a coattail hanger to Apple riding Apple's success but it looks like Rim's falling off the rampaging Apple cart this time for good and these lil blackberrys are gonna get trampled into blackberry current jam by Motorola, HTC, Nokia, Samsung, LG, Microsoft, Dell, Sony parade trucks bring up the rear behind Apple. Long Apple, short Rim.

Oct 20 03:29 AM

[Hirschd:]

Absolute Rubbish Jamesapple!
Just look around you,watch Rim's space. There is no other product comparible with Blackberry,You really got the Needle to the company!
You must have some very personal gripe with Rim that is haunting you!

Oct 20 06:38 AM

[Ridge Hill ...:]

why not a pair trade..short apple long rim

it has worked

i am looking at buying rim at 60 or less depending on my analysis

i ahve traded rim since the ipo in 1998...and usually missed the excitement phase when rim is loved......apple is hated...........the reverse is true now ...thats why i am looking at rim

dont like apple...........in fact dont care it made a new all time high last night

Oct 20 07:58 AM

[Wireless Wiz:]

Agreed - just own both. Too many macro tailwinds in the industry not to. And JamesApple will never see that - too broad a theme for his narrow mindedness. Keep on hating jimmy boy!

Oct 20 10:00 AM

[relayer75:]

"Just own both" is the correct play. RIMM is currently back on its heels, at less than half its all-time high, but is still the dominant player in enterprise wireless communications, and that isn't changing any time soon. AAPL is continuing its dominance in the high end computer / smartphone / gadget / music / what next / ecosystem. Both AAPL and RIMM will survive and prosper. RIMM is historically cheap right now, it's a buy. AAPL is at its all-time high, but deservedly so because it is the best performing mega-cap technology company in the world, taking market share and dominating every category it chooses to enter. Short AAPL at your peril.

Oct 20 11:22 AM

[PalinTologist:]

'why not a pair trade..short apple long rim

it has worked'

For Whom?

"dont like apple...........in fact dont care it made a new all time high last night"

Sounds like someone has more emotion than capital invested in these two companies. And if these are truly your beliefs, soon emotion will be the ONLY expression of your beliefs.

Your comments are foolish.

Oct 20 11:22 AM

[JamesApple:]

Apple would not want to be paired with Rimm. Blackberrys are inferior outdated beady QWERTY corporate email phones with a pager only heritage. Rimm has to stop leeching on Apple and hire some more U2 kinds of cheerleaders to tout its horns. There is simply no chemistry between Rimm and Apple, they are simply rivals who cannot survive together in the same space. Apple is going to capture most if not all of Rimm's businesses. Rimm can keep its little pathetic enterprise businesses, Rimm has no business in the consumer space and the iPhone, Hero, Droid, MyTouch and newer devices will see to it that no inferior blackberrys can survive in the consumer space, BOGOberry or not.

Rimm has to stop leeching onto Apple's phenomenal successes, it lacks class and basic decency, and surely this tactic doesn't even work. Short Rimm.

Oct 20 12:14 PM

[Wireless Wiz:]

A demonstration of unwillingness to do research and gain knowledge.

They cannot survive in the same space? Yet smartphone adoption is growing very rapidly and they have been prospering in the same space for 2 years now.

If you ever actually did some homework, you would know that 80% of new Blackberry subscribers in the last quarter were consumers - that's over 3 million new consumers that purchased Blackberry.

Tough to argue with logic, James, but facts are facts. You should start a blog about how much you hate RIM - might be a better forum for your putrid rants.


On Oct 20 12:14 PM JamesApple wrote:

> Apple would not want to be paired with Rimm. Blackberrys are inferior
> outdated beady QWERTY corporate email phones with a pager only heritage.
> Rimm has to stop leeching on Apple and hire some more U2 kinds of
> cheerleaders to tout its horns. There is simply no chemistry between
> Rimm and Apple, they are simply rivals who cannot survive together
> in the same space. Apple is going to capture most if not all of Rimm's
> businesses. Rimm can keep its little pathetic enterprise businesses,
> Rimm has no business in the consumer space and the iPhone, Hero,
> Droid, MyTouch and newer devices will see to it that no inferior
> blackberrys can survive in the consumer space, BOGOberry or not.
>
>
> Rimm has to stop leeching onto Apple's phenomenal successes, it lacks
> class and basic decency, and surely this tactic doesn't even work.
> Short Rimm.

Oct 20 01:56 PM

[joe beckland:]

i have also bought and sold rimm a bunch of times and made money untill this last earnings dropped me so much. I had bought more at 80 just before earnings and then tried to average some more at 72 when they tanked and now i finally exitted at 68. They will go down for a while now and then eventuallywhen they get back up to 75 or so ---buy it back and ride to 95. In the meantime, put your money to work- buy some Brazil ETFs or GOOG or something from China like CBAK.

Oct 20 02:45 PM

[brewer:]

Time to own Apple and sell RIM. Don't hate on me for warning you. RIM is coasting, similar to what Microsoft has been doing since they stole the IBM contract for DOS and then the Mac GUI (such bits and pieces as they bothered to implement) for Windows.

Really, RIM is a GREAT email mobile device, that can do the simple stuff like playing music, but it's not...

1) coupled to iTunes (best of class media server that it IS)
or
2) anywhere remotely close to the pocket computer experience you get with an iPod Touch, let alone and iPhone.

RIM was a great device---in 1995 when it was developed, it was still way better than MSFT Windows Mobile (talk about a curse) use in 1999 when it was released, but it was totally laid to pasture when the iPhone shipped. Just because you can't understand that, or are in love with it, doesn't mean it's not true.

RIM has a snowball's chance of ever competing, but will continue to fall farther and farther behind. Eventually you will realize this.

Oct 20 11:20 PM

[RIMMSTER:]

Not only do I hate apple, but I hate apple people and the way they talk about apple. The iPhone is a one time hit, it is going to be like the moto razor. I have an iPhone EDGE, Absolutely not going to get another iPhone. Battery dying, cant replace it. Cant use it without a case because it is more slippery than a bar of soap. Cant listen to online radio and do my work. Always crashes on any intensive apps. My next phone will be the Tour refresh and switching to verizon.

On Oct 20 12:14 PM JamesApple wrote:

> Apple would not want to be paired with Rimm. Blackberrys are inferior
> outdated beady QWERTY corporate email phones with a pager only heritage.
> Rimm has to stop leeching on Apple and hire some more U2 kinds of
> cheerleaders to tout its horns. There is simply no chemistry between
> Rimm and Apple, they are simply rivals who cannot survive together
> in the same space. Apple is going to capture most if not all of Rimm's
> businesses. Rimm can keep its little pathetic enterprise businesses,
> Rimm has no business in the consumer space and the iPhone, Hero,
> Droid, MyTouch and newer devices will see to it that no inferior
> blackberrys can survive in the consumer space, BOGOberry or not.
>
>
> Rimm has to stop leeching onto Apple's phenomenal successes, it lacks
> class and basic decency, and surely this tactic doesn't even work.
> Short Rimm.

Oct 23 10:11 PM