RIM: Will BB 10 Devices Revive Stock In 2013?

Sep. 7.12 | About: BlackBerry Ltd. (BBRY)

Most smartphone users have already written off Research in Motion's (RIMM) BlackBerry as an archaic brand that sang its swansong when the company decided that Apple's (NASDAQ:AAPL) first iPhone was a toy. Apple's iPhone is currently the most popular smartphone in the market, followed by Samsung's (OTC:SSNLF) Android-based cellphones. Google's (NASDAQ:GOOG) Android OS has been adopted by other cellphone makers such as LG, Sony (NYSE:SNE) and HTC.

BlackBerry devices are obsolete, run on outdated software and are not consumer friendly, and they are probably only good at enterprise security. RIM has delayed its next generation devices for more than a year, and investors have stormed out of conferences that CEO Thorsten Heins has regularly held to instill confidence. With such a dismal and pathetic situation, RIM is not a stock that any investor would be interested in. What is interesting is that RIM's shares rose by 4% soon after Apple was awarded $1.05 billion in damages by a court in the U.S., after a verdict was reached that Samsung copied Apple's iPhone.

Why must this be of any interest to investors or analysts? RIM's Blackberry is a unique product that is unlike any other in the market today. The software and the devices are owned by RIM and the company also holds a number of licenses and patents. Apple or other companies cannot sue RIM for patent infringement the way Samsung was sued. Google may stand to be sued by Apple next, as the company believes that Android was copied from iOS. After Apple won the case against Samsung, many manufacturers have expressed their fears about using Google's Android, and have indicated that they may begin to use Microsoft's (NASDAQ:MSFT) Windows 8 on their devices to escape litigations. Microsoft's mobile operating system has been positively received, is litigation free, and is an attractive option over the popular Android OS, which is now increasingly being seen as a dangerous option for manufacturers.

RIM is also debt-free in spite of all its financial woes and still has a few months to last before it will begin to go under debt. Another aspect that makes RIM interesting is the fact that BlackBerry 10 devices have received positive reviews by those who have seen or used them. If one takes iOS and Android into account, it is difficult to multi-task and one has to jump from application to application by going back to the homescreen. Thorsten Heins revealed that BlackBerry 10 devices provide a smartphone experience that is altogether different from iOS, Android and Windows 8 devices. He suggested that BlackBerry 10 devices would feature superior internet experience and multitasking capabilities that have never been seen on a smartphone. Come to think of it, multitasking on a phone equipped with an excellent tactile keypad and accessing the Internet and social media websites easily is something that sounds like a dream.

Scribes from the Pocket Lint magazine were given exclusive access sans cameras to the future BlackBerry devices. They reported that there shall be 6 devices, of which 2 would be targeted at the higher-end of the market. While they didn't have anything negative to say, I guess this is where all things positive about RIM end. The very fact that these devices will be launched in the first quarter of 2013 is enough to make people move on. With iPhone 5 (or whatever name it will be called with) scheduled to be announced on the 11th of September, and newer Android and Windows 8 devices in tow, BlackBerry has little chance to survive these next-generation devices. No one is going to wait for another 6 months for these BB 10 devices which were just announced. Technology changes at a breakneck speed and RIM has failed to understand this basic concept of consumer electronics. Even if RIM's licenses, patents and uniqueness make it stronger and legally safer than Samsung's rehashed, iPhone-influenced phones, it is extremely late to expect that those who have abandoned BlackBerry devices will return to the devices again.

An aspect that RIM fails to understand is that those who use iPhones and Android phones refuse to change platforms because they invest a lot of money in applications. By hopping over to RIM's cellphones again, they stand to lose several hundred dollars worth of applications. I have purchased almost 160 applications worth more than $500 for my iPhone. This remains a significant reason behind my decision to purchase the next device, which probably will remain an iPhone again, in order to be able to use my already-purchased applications.

At less than $7 per share ($6.52 on the 6th of September) and $2.2 billion cash flow, RIM is not in a good shape at all. RIM's Enterprise Value stands at $1.49 billion whereas, it's Market Cap remains steady at $3.37 billion. The most recent numbers reveal that RIM has a negative Profit Margin of -0.30 and an Operating Margin of 4.68%. With Return on Assets being 3.55% and Return on Equity being -0.51%, I believe RIM should be avoided. I think investors should wait for the new phones to arrive in the market before even considering this stock. If the BlackBerry 10 devices are as interesting as they are being described, and if they support multitasking, the devices will have a chance of at least competing with other devices in the market. The BlackBerry 10 devices may help RIM in a very modest improvement of sales and figures in the first half of 2013, but, due to RIM's current position, you should not consider buying until then.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.