Who doesn´t have a smartphone? Since the arrival of the iPhone, the communications market has been telling us that the use of these revolutionary and life-enhancing devices has been increasing globally. Statistics tell us that almost everyone purchasing a new mobile in Europe and the US will likely opt for a smartphone device as opposed to the traditional and lower functionality devices that we considered highly advanced only a few years ago. The mobile phone market has developed at lightning speed and the emergence of Android as a serious competitor to the Apple (AAPL) standard has effectively created a two-horse race in the competition of functionality and design. For the makers of these devices, and the huge revenues that they command, the movement to smartphone technology has allowed Apple to command larger cash reserves than the US Treasury if reports are to be believed.
But while Apple and makers of Android-based devices are smiling all the way to the bank, the same may not be the case for Research In Motion (RIMM), makers of the Blackberry smartphone device. While consumers have been exercising their preferences, it has to be a bitter pill to swallow for shareholders of Research In Motion to see their counterparts at Apple grinning from ear-to-ear as the company´s global status rockets to a point where Steve Job's brainchild becomes the symbol of a generation. They, meanwhile, sit on the sidelines eating sawdust and gorging on unfulfilled earnings expectations. So what exactly went wrong for this phone maker, and what can be the expectations of shareholders as we continue into 2012?
Research In Motion has been described by some as a classic case where a company both failed to listen to its consumers and failed to react to changing market trends. In developing countries within Africa and South-East Asia, where Research In Motion still holds sway, the Blackberry's attraction is its free chat capability. It's influence in the lucrative Western Markets, however, is dwindling in light of the innovations of its competitors. Google's (GOOG) Android-based operating system, with its built-in ability to run on several platforms and diverse applications market, has dealt a real killer blow to Research in Motion.
The stats do not lie. The purchasing preferences of new smartphone owners from the period dated June 2011 to September 2011, with 56% of new smartphone acquisitions being Android devices. Apple devices more or less held steady while that of Blackberry fell by whopping 50%.
Such statistics cannot be good news for RIM shareholders who, having been forced to endure a catastrophic 75% drop in the value of their holdings in the last 12 months, prompted them to demand an immediate change in leadership of the embattled company.
The full year results (FYQ4) for Research in Motion were due for release on Thursday March 29, 2012. Analysts are expecting a drop in revenue from $5.6billion to $4.5billion, as well as a more than 50% drop in earnings per share from $1.78 to $0.81.
Research in Motion's shares was trading at just under $14 the day before these results were due to be announced. Traders may have already priced in the disappointing results but it is entirely possible that, if the results are worse than expected, we may see a further sell-off in the share price of RIM.
This will be the first FYQ4 report released under the new CEO Thorsten Heins. Analysts and market observers will be looking for reassurance and innovative strategies on exactly how the company plans to counter the seemingly endless innovations of Apple and Google that have seen these two companies run Research In Motion off the tracks.
Thinking positively, while Research In Motion is possibly entering its darkest hour, the company can still potentially pull itself out of the mire and reestablish an edge in this hugely competitive market. However, such a turnaround would inevitably involve the two words that investors hate to hear the most - "time and investment". There are a variety of complaints that RIM needs to address. Part of what has driven Apple's success is the availability of high-quality applications in its online App Store. App developers have long complained of the lack of developer-friendliness with the Blackberry app interface and many have simply boycotted this in favor of the more accessible Android design. Statistically, 8 out of every 10 smartphone application developers will easily choose app development on the Apple/Android-based platforms over the Blackberry app developers' platform.
The instant and high-quality Apps which apply everyday life are the ones which drive people to buy smartphones and Blackberry is seriously lagging with its clumpy and awkward platform. While Blackberry refuses to adopt changes that will attract high-level developers who form the basis of consumer attraction to its phones, its fortunes will not improve. A brief look at the recent product releases of Apple tells a striking story. Without even the need to pitch his company's products, Tim Cook can watch global stores being sold out within 10-15 minutes of new Apple product coming to market.
Nokia (NOK) is one company that has shown that being responsive to market demands, rather than holding on to the belief of a select few in management, can be converted into revenue. Innovative products have ensured that Nokia has bounced back from being an "over the hill" company to a strong market contender once again. This model of regeneration is one which Research In Motion may benefit from imitating.
Traders and shareholders at Research In Motion want to see such changes. If the FYQ4 conference call can give them the innovative and forward-thinking news they want to hear, then we may see renewed interest in this stock. If, however, it is going to be the same old rhetoric, then 2012 may be the death knell for Research In Motion in the West.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.