The largest most innovative companies in the world began with an idea. The idea then transformed with an action which ultimately produced a product that was transcendent for its clientele. These mega companies of which I speak of offer a product or products in a way that forces competition to evolve. The companies in which I will discuss have all experienced this success. They have all experienced the high of highs but are now being forced to experience the low of lows.
These corporations have never had to endure the changes they are being forced to make. Each company set the level for success at one time and is now trying to reach it once again. These are companies in the technology sector being left behind.
Research in Motion (RIMM) experienced great success and growth from their breakthrough BlackBerry designs. In 2003 the smart phone BlackBerry device was released, which sent the stock from $2.45 to $145.00 during a 6-year span.
The stock is priced at $25.71 as the result of several company related issues. The decrease in price could be an overreaction since the company has produced an increase in earnings every year since the smart phone era. However I would not be willing to buy on value as I do not see value but rather a company that is falling even lower.
The company cut full year guidance admitting a weakness in BlackBerry smart phone sales. As a result the company cut 2000 jobs more than 10% of their workforce. The company believing the decline in business is operational has taken several steps internally. They have reorganized management hoping that their problems will be solved.
The real problem is that consumers are walking in their local AT&T (T) or Verizon (VZ) stores to see a BlackBerry phone next to an Apple (AAPL) iPhone similar in price. The competition is non-existent as consumers have traded in their BlackBerry's for Apple products. You can review the latest quarterly results or full year guidance from both companies to see the rate at which Apple is growing and Research in Motion is declining.
Research in Motion is simply two steps behind the competition. They have announced several product delays as of late. It took BlackBerry a long time to release its PlayBook tablet in comparison to competitors. While the PlayBook does offer several incentives such as high resolution picture the late timing could put the company in a situation to where they do not capitalize on the demand. Research in Motion is counting on its QNX operating system which powers the PlayBook tablets. It will be available on handsets sometime in 2012 assuming there are no delays.
I do not believe this operating system will provide much in additional success for the company. If the release takes place in 2012 then there will be competition from new Apple and HTC products. The company cannot get ahead of their competitors and at this point I do not believe they will. They have to be creative and develop a product that is transcendent with consumers in order to succeed. With nearly $2 billion dollars to spend, the company will not be filling for bankruptcy any time soon. A company such as Research in Motion is innovative by nature and employs brilliant individuals, meaning the company will take chances on developing new technology. I see two options for Research in Motion over the next five years, either a $100 billion cap or bankrupt. I do not believe they will be satisfied as being average.
Nokia (NOK) is another company in the communication industry that is facing serious problems. Last week I wrote an article in regards to Nokia and the positive steps they have taken to correct their organizational problems. The company has completed several partnerships, contracts, expanded their mapping divisions, restructure of organization, and a partnership with Microsoft (MSFT). The point being that Nokia has taken steps to address their issues but still face an uphill battle.
The stock is currently trading near its lowest point in over a decade as the outlook appears weak. The company has paired with Microsoft as they will attempt to create a new Windows phone that will challenge the competitive market. Both companies have failed to produce in this area of growth and are seemingly missing their opportunity to take advantage of the demand. Nokia and Microsoft could have the same problem as Research in Motion. All three companies have been slow to produce and will have new products in 2012. The problem being companies such as Apple, and others, who will be releasing their new products either before or near the same time.
Both Research in Motion and Nokia have a substantial amount of cash to create and advertise their new products. However they are running out of opportunities and neither company can afford any delays they have to deliver with these products in order to remain near the top.
These companies can no longer afford to throw products against a wall hoping one will stick. I am crossing my fingers that they succeed and my instincts tell me they will. However, investing should not be played upon instincts, there has to be a fundamentally strong company to support the stock. Therefore I would not invest at this time in fear that the stocks could drop lower. I feel Nokia has a better opportunity to succeed as their business is more powerful on a global platform and they have done a wonderful job in developing other areas of business. Both Nokia and Research in Motion are companies compiled of very intelligent individuals who know how to succeed and only time will tell whether or not they will.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.