RIM's BlackBerry Struggles Vs. Androids And iPhones

| About: BlackBerry Ltd. (BBRY)

I recently heard someone say that Research In Motion (RIMM) has had its clock cleaned by its competition. The person was referring to the decline in the company's BlackBerry smartphone, as more mobile phone users are choosing iPhones and smartphones that run on the Android platform.

Research In Motion's main competitors are Apple (AAPL), Google (GOOG) and Nokia (NOK). Of the three, only Nokia is struggling financially as much as Research In Motion.

I have to agree with the "clock cleaned" comment about Research In Motion, despite knowing many people who adored their BlackBerry phones so much that they seemed to not be able to function without them. However, I'm seeing more people opt for iPhones and Android-powered phones, and this evolution is taking a toll on Research In Motion's bottom line. Wireless carriers like Verizon Wireless (VZ), Sprint (S) and AT&T (T) are also choosing iPhones and Android smartphones to sell to their customers.

When Research In Motion announced its 2012 fourth-quarter earnings last week, it reported that BlackBerry smartphone shipments were down 21% compared to the third quarter. Revenue slipped 19% to $4.2 billion, down from $5.2 billion. Thorsten Heins, the company's latest chief executive officer who has been on the job for less than three months, tried to point out the company's strengths. He says the company's strength "can be further leveraged to improve our financial performance, including Research In Motion's global network infrastructure, a strong enterprise offering, and a large and growing base of more than 77 million subscribers."

Key to the company's future is its ability to roll out innovative products that can compete with the seemingly endless versions of iPhones from Apple. When you throw Google's Android devices into the mix, you can easily see that Research In Motion has its work cut out for it.

However, I see promise in the prospects for the BlackBerry 10 platform that Heins says should be on the market by the end of the year. Also important to the company's success is its commitment to BlackBerry Mobile Fusion, which is intended to simplify the management of smartphones and tablets running BlackBerry, Google Android and Apple operating systems. Finally, the company has not ruled out partnerships and joint ventures to help it improve its position.

How much any of this will help Research In Motion meet its goals of maximizing value for its stakeholders remains to be seen. You can, however, glean some information from a review of the company's fundamentals. Its market capitalization is $7.5 billion, which is considerably lower than some of its competitors. By way of comparison, Apple's market cap is $559 billion, Google's is $208 billion and Nokia's is $20 billion.

Research in Motion's gross margin clearly reflects its financial problems. In August 2008, it was 50.71% which shows its strength at that time. The following month it began its decline, and now is 38.63%. Its profit margin over the past three years has also declined, further showing how difficult it has been for the company to move its products, including the BlackBerry smartphones. In June 2009, its profit margin was 18.78%. The margin stayed at that level until February 2011, when it declined to 16.81%. It is now 11.23%.

With all of these challenges ahead of Research In Motion, I believe things will likely get worst before they get better. I expect the upcoming release of the iPhone 5 to be a boon for Apple, just as its other iPhones were. The rollout of the Apple TV will allow the company to tap into another market, which is another plus. Shares of Apple have finally broken the $600 mark, and I think that the stock will continue to go up given these plans. Also, Apple has announced that it will begin paying a quarterly dividend of $2.65 a share in the fourth quarter of its 2012 fiscal year, which begins July 1, 2012. It also announced a $10 billion share repurchase program set to begin in its 2013 fiscal year on Sept. 30, 2012. These steps appeal to growth and income investors.

Google's dominance in the smartphone world stems from its Android platform. The company's Android-powered tablets are also boosting its bottom line. Its gross margin is a strong 65.2%, which has risen steadily over the past five years.

Since 2007, Nokia's earnings per share have fallen from $0.98 to $0.41. Its profits may improve once AT&T starts selling its Lumia 900 smartphone this month. When Nokia announced the arrangement, it noted that the device will run on Microsoft's (MSFT) Windows Phone operating system. It is expected to be less popular than the iPhone and Android smartphones.

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