More Ambiguity At RIM As Apple Continues To Eat Its Lunch

Oct.20.11 | About: BlackBerry Ltd. (BBRY)

Is a dream a lie if it don't come true
Or is it something worse

-Bruce Springsteen, The River

The ambiguity started earlier this year at Research In Motion (RIMM) as the company set its shareholders and unassuming longs up for a monumental fall. Consider what I wrote back in June about how company management, particularly co-CEO Jim Balsillie, mishandled earnings guidance:

On RIMM's Q4 2011 earnings call, the company stuck to its FY2012 prediction of EPS of $7.50. Given that report, it would not have been illogical for somebody to go long the stock on the basis of what management said, materially. Despite the obvious and widely-reported issues since that call, RIMM did not lower guidance until yesterday...

Can anybody tell me, with a straight face, that RIMM did not see this coming between the Q4 2011 and Q1 2012 reports? If this is not a breach of the company's responsibility to its shareholders, I am not sure what is. Think about the real world consequences of RIMM's passive approach, until the last possible second, to FY2012 guidance...

Shareholders who bought RIMM stock - at somewhere in the neighborhood of $60 - on the basis of what they heard on that Q4 2011 call now, potentially, hold a $30 stock. If you did not bite then, maybe you bit when RIMM got hit after lowering Q1 2012 guidance because it kept the $7.50 FY2012 estimate intact. At that point you would have gotten your value or bargain for $48 - only to see it fall, potentially, to $30...

Surely, an investor who got into one of the above-mentioned situations shares in some of the blame for getting burnt. And, no doubt, the same investors would have been wise to cut their losses. But, that's not the point. Because RIMM held fast on FY2012 guidance on the Q4 2011 call and when it lowered quarterly guidance in late April, you might have been encouraged by the seemingly bullish long-term outlook.

That sentiment could have not only prompted initial buys, but made shareholders sitting on unrealized losses take the opportunity to average down. Why wouldn't you have? RIMM management painted a picture of short-term pressure, a FY2012 story that was on track. Not until yesterday did it reveal that what it had been sticking with all along for the full year was nothing more than something south of a dream.

Sadly, it's not only the long-passed guidance mess that calls into question how RIM communicates with its shareholders. Earlier this month, I wrote about the non-response I received from RIM investor relations when I asked about the company's numbers in enterprise. RIM management often speaks in very general terms when it discusses its business, even, somewhat surprisingly, in relation to its apparent bread and butter - enterprise.

Consider the following excerpts - which we can now safely call "dreams" -- from the company's Q4 2011 conference call:

Many existing BlackBerry enterprise customers, including a good portion of the Fortune 500, will receive PlayBooks for review in the coming weeks. Many enterprise customers have told us that they have delayed their tablet deployment plans in anticipation of the PlayBook launch. For instance, the CIO at Manulife Financial has told us that they plan to deploy across all divisions in Canada, the U.S. and Asia, and PlayBook is the top of their list for its great performance, security, lower operating costs and employee productivity benefits. And Royal Bank of Scotland recently announced that they will be offering their research and strategy products via BlackBerry PlayBook in response to customer feedback.

The launch of the PlayBook will be the most significant development for RIM since - may well be the most significant development for RIM since the launch of the first BlackBerry device back in 1999...

It's not in the hundreds of thousands. No, I mean, clearly, it's a major, major launch that we expect to be a growth driver for a long, long period of time. And I just don't want to get into sort of semi-guiding, but the interest is extremely high. This is a shift in computing globally. The demand - let me put it this way. I've got many corporate clients that have approached us about each wanting tens of thousands, several tens of thousands of PlayBooks.

If you're drinking liquid right now, it's likely coming through your nose.

Even though RIM will not give us actual numbers, others will. Network World reported on an Enterprise Management Associates (EMA) report that spells doom for RIM going forward in the corporate sector:

A new survey released by Enterprise Management Associates (EMA) today found that 30% of BlackBerry users in enterprises of 10,000 employees or more plan to switch to a different platform over the next year. EMA says this will lead to a significant reduction of RIM's market share in large enterprises, which currently stands at 52%.

"We expected to see some market share loss by RIM, but these results were far more dramatic than we could have anticipated," says Steve Brasen, EMA's managing research director. "Both enterprises and employees indicated they were broadly abandoning BlackBerry devices for primarily Android and iOS platforms, and this data was collected before the recent BlackBerry service failures, which can be expected to even further accelerate migration."

EMA says that lack of user satisfaction is the key reason that users want to move away from BlackBerry devices, as only 16% of BlackBerry enterprise users said they were "completely satisfied" with their devices. By contrast, 44% of iPhone users said they were completely satisfied with their phones.

And, of course, Apple (NASDAQ:AAPL) provided more not-so-indirect color on RIM's pending enterprise implosion during its Q4 2011 conference call:

iPhone continues to be adopted as the standard across the enterprise with 93% of the Fortune 500 deploying or testing the device, up from 91% last quarter and 60% of the Global 500 testing or deploying iPhone, up from 57% last quarter. A recent example of iPhone's enterprise success is Lowe's. Lowe's is in the process of rolling out over 40,000 iPhones with a custom application to allow their store associates to execute realtime inventory checks, product orders and interactive customers with how-to videos.

Additional examples of companies around the world supporting iPhone on their corporate networks include L'Oreal, Royal Bank of Scotland, SAP, Texas Instruments, Jacobs Engineering Group, Tenet Healthcare, Jaguar Land Rover, Takeda Pharmaceuticals, Lincoln National and CSX Corporation...

Today, 92% of the Fortune 500 are testing or deploying iPad within their enterprises, up from 86% last year. Internationally, 52% of the Global 500 are testing or deploying iPad, up from 47% last quarter.

Considering what has happened in 2011 and that virtually nothing has changed - despite the same old and tired assurances that someday we'll see BBX and QNX and that people will actually care - it boggles my mind why a gaggle of tortured RIM supporters still touts a turnaround. Thousands of other stocks exist that you could go long on. Why select one with so many question marks and an executive team so unwilling - or worse yet, unable (?) - to provide any meaningful answers?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.