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By Fani Kelesidou

Established in 1984, Research in Motion (RIMM) is one of the largest smart phone makers in the world. The company faces great competition from its competitors. Once a leading innovator, the company behind the Blackberry product line is swimming in turbulent waters. In the last few years, RIM's fallen sales volumes and diminishing market share has caused increased skepticism about the company's future prospects. However, with 80 million subscribers, Research in Motion still remains a solid player in the industry.

The Bad News

RIM revolutionized the mobile industry when it created a power-emailer in the early 2000s. This small device that could fast email and stream earned the hearts of corporate executives and white-collar professionals. The company dominated the market by relying on its hardware platforms up until 2007. Since then, management's incompetence and a series of marketing failures caused RIM's value to deteriorate. While rivals, such as Apple (AAPL) and Google (GOOG), made their debut into the software market, RIM failed to adjust to the transformation of the tech world. Apple led the mobile app revolution and Google introduced the groundbreaking Android platform. At the same time, RIM struggled to keep up to the competition.

The stock's five year chart is the definition of a falling knife. Over the past five years, the stock's price has followed a downward trail and RIM lost about 93 percent of its market value. For Q3 2012, Google clearly stood at the forefront of the smart phone industry. It shipped more than 130 million units and held an outstanding market share of 75 percent. Apple came second with a market share of 15 percent. RIM claimed the third position by achieving a market share of just above 4 percent. Some analysts even suggest that RIM could lose its position to Microsoft's (MSFT) Windows Phone 8 devices. Microsoft, backed by Nokia (NOK), Samsung and HTC, has made a promising entrance in the smart phone business. Perhaps, WP8 devices will not be as competitive as the soon-to-come BB10. However, the early launch of WP8 handsets has provided Microsoft with a significant advantage.

More bad news came from the United States Immigration and Customs Enforcement agency [ICE], when it decided to end its 8 year collaboration with RIM. About 17.000 ICE employees will switch from Blackberry to Apple devices. The agency justified its decision by claiming that the RIM technology is no longer compatible with its mobile technology needs. It seems as if RIM is losing the battle as other clients are highly likely to follow ICE's steps.

The Good News

Some good news came from the company's latest financial results, which show a modest rebound. I do not suggest that by a miraculous way the company managed to become profitable again. However, it did manage to slow down its bleeding. In a market that is ruled by Google and Apple, RIM exceeded analysts' expectations. The company ended the second quarter of fiscal 2013 with more cash and higher revenue than expected. For the six months ended September 2012, net cash provided from operating activities revealed a 17 percent positive change compared to last year. RIM reached revenue of $2.9 billion. Even though, revenue figures showed a significant drop on a year-over-year basis, still the total revenue broke analysts' median benchmark of $2.48 billion. Also, RIM shipped approximately 7.4 million smart phones while analysts predicted about 6.9 million.

A decisive factor in the company's future performance is the QNX component. I expect the new BB10 operating system to provide a successful turnaround for the company. Why is that? RIM acquired QNX, a leading software maker established in 1980. QNX's software runs the security, infotainment and hands-free system in General Motors' (NYSE:GM) cars. It also runs routers and switches on Cisco's (NASDAQ:CSCO) networking systems. BB10 embeds the best features from QNX's operating system and provides a reliable shift away from "monolithic" designs. The new operating system is in the final stage of testing before its launch in Q1 2013. The improved OS is expected to deliver an optimum user experience by combining high quality security parameters and usage innovations. Some of them include simultaneously working profile applications. Moreover, the company considers licensing its new operating system seeking for additional cash flows.

Summary

Generally, analysts have been bearish about RIM's performance. The company has been missing out in the smart phone battle. However, I do suggest that the game is not over for RIM. Currently, the stock is priced at around $8. Over the last three months, the stock has performed nicely by returning more than 10 percent. I do expect this upward trend to continue, especially in anticipation to the release of the new handsets. RIM's valuation metrics suggest a value opportunity. It is trading with a 70 percent discount to sales and about half its book value. While EPS this year followed a disappointingly negative pace, next year's EPS is estimated to grow by 57 percent. Overall, I strongly believe that RIM will surprise the market and reward its faithful shareholders in the long-term.

Source: Is RIM Still In The Game?