Morgan Stanley's RIMM Shot:
Yesterday Morgan Stanley (MS) released a research note on Research in Motion (RIMM) titled "Research In Motion Ltd. FQ2 Preview: The Downward Spiral Continues;" Morgan Stanley's sell to $5 thesis is presented succinctly in its opening salvo, paragraph 1:
We set low probability BB10 becomes a viable 3rd mobile OS, as checks uncovered NO developer support, and suggest BB10 devices debut at the end of CQ1, taking the stock towards our $5 Bear case.
The premise here is simple: there are no apps for BlackBerry's new OS, and none will be developed. Morgan Stanley then continue with a more detailed explanation:
We are finding literally ZERO support for RIM's new BB10 OS, following our latest developer checks, raising the possibility that when RIM finally throws its big BB10 launch party, nobody shows up. We believe a thriving app ecosystem is vital to creating a new mobile OS.
It is hard to argue with Morgan Stanley's premise: You need a thriving app ecosystem for any OS to survive (if in doubt please see Palm OS, HP (HPQ), Nokia (NOK) et al.) The Apple IOS/Android user experience today largely revolves around pushing buttons that say "Kayak" that then launch a Kayak app. For the other OSs, be it WindowsPhone OS7/8 or BlacBerry's OSs, there is scarcity of Apps. In fact many analysts on Wall Street today predict a two-OS world: an IOS and Android.
Morgan Stanley's team lays up a perfect three point shot to sink RIM along the line of the argument that "there are no apps, we have surveyed developers and none are coming etc," As Apps are key behind a smart phone OS and as Rim's BB10 has no support here, so Rim's BB10 will be DOA. But it is on this very point that Morgan Stanley and many others who are short tripped on a little piece of software called QNX.
The QNX OS that powers BlackBerry's OS2 and BB10 operating system is one of the most robust and literally battle tested operating system. Follow these links for examples of some minor uses across various industries: automotive, army tanks, army drones, and bank ATMs. The QNX OS has been around for over a decade, is thoroughly tested, and well-developed. Most importantly, QNX can deliver the true holy grail of mobile OS's: true multitasking, something both Apple IOS and the Windows phone find painful. And even worse for Morgan Stanley, QNX combined with RIM's "Android Player" effectively allows RIM to crash Android's party and opens RIM users to the Android App world.
Why Do RIM Investors Care About Multitasking?
The answer is found in the Android Player. This neat little piece of software enables BlackBerry users to have access to the Android Apps. The first version of the software has been around since July. You can see it on numerous YouTube videos of BlackBerry tablet's running Android Apps. The new and highly anticipated release of Android Player is due in OS2.1, and is expected momentarily according to Crackberry.
The Android runtime has been bolstered to allow multiple apps to run in separate windows. According to Liliputimg.com:
Tops on the list are improvements to the Android Player. The PlayBook will no longer run converted Android apps inside a single application space. From 2.1 onward, apps will appear individually in the task switcher just like native PlayBook apps always have, or windows tasks etc.
- In other words, BlackBerry users will have access to the majority Android apps;
- These will be launched by simply tapping an icon on the screen, just like Android and IOS users do currently;
- They will run independently of each other.
Essentially, BlackBerry has just made available to its users the virtual entirety of the android app eco-system. As long as users have an email icon, a browser icon, Facebook, Twitter and Android Apps to fiddle with, do they really care that the hardware is running on a BlackBerry OS an Apple OS, or an Android OS? The user experience remains broadly similar across platforms. BlackBerry OS10 users will have thousands upon thousands of Android Apps to push to their heart's delight thanks to the QNX driven BB10.
So even if no one shows up to RIM's party, Morgan Stanley's point is moot: RIM have just crashed Android's party. It is this rather obvious miss that leads to Morgan Stanley's RIM Shot vs a 3-pointer piece of research. If RIM has been able to crash the Android App party, RIM has stepped around the most important assumption in the Morgan Stanley short thesis (it was after all the lead of the research note), and has transformed itself into a viable long shot for comeback of the decade.
As of the writing of this article, September 25th, RIM has announced that its BB10 has been well received by mobile operators. As a reader, you must ask yourself what the mobile operators saw that the Street missed?
Disclosure: I am long RIMM.