So I bought RIM (Research in Motion) at $7.54 about a month ago and I'm bailing on the shares as it looks like my PR thesis is not going to play out.
My thesis, for those who have been following, was that RIM packed so much bad news in to one quarter, that with the bad news in its rear view mirror, we would see a news cycle of speculation and articles articulating the value in RIM beyond the doom and gloom.
In addition, my thesis suggested that RIM had to start talking about the innovation in BB10 right now. In my opinion they couldn't go silent for the next three months and simply hope that consumer sentiment would not degrade further.
My thesis looked like it would play out with a one time bump up 12 per cent on Amazon acquisition speculation. In addition, Prem Watsa doubled his investment in RIM and now owns 10 per cent of the company. So it looked like a speculative / value news cycle might get off the ground (there's no reason it shouldn't have, other than incompetence, which I'll address in a second).
Now, I still think it's entirely possible that RIM shares will rise and you could make a killing on them (if only from a technical perspective). And if BB10 is a hit, the stock will soar.
There are plenty of items that make RIM attractive:
Having said that, here are the latest developments that have made me re-think my investment in RIM and decide that, despite the value potential, it's not worth the hassle or risk sitting in this stock.
1) Rewarding Failure
I thought RIM's days of rewarding failure were behind it - they did clean house at the executive level after all. But alas, I read an article today - New BlackBerry boss pleads with customers to stay - where we learn that the guy responsible for RIM's "Wake UP" campaign in Australia, which was an unmitigated disaster in my opinion (read my opinions on this in a past blog entry - RIM just can't wake up) just got promoted to managing director.
Now, who knows, maybe he had a boss that pushed the idea and Ball simply carried it out, but from the tone of the article it sounds like it was under his pervue.
Nothing against Ball as a person, I have no idea who he is to be honest, but whoever was in the charge of the Wake Up campaign should have been let go. The fact that he was promoted tells me that RIM's internal talent decisions are probably more a function of politics than accountability, responsibility and results.
If I had to guess, I suspect RIM may be cleaning house based on a 'friends don't fire friends' model (ie. if your boss likes YOU, regardless of your performance, then you're safe).
2) RIM's #1 GUI guy leaves
In 2010 RIM acquired TAT, a company that designs the user interface you get on your mobile device. As you can imagine, these guys became a critical part of building BB10. Today, TAT founder, Hampus Jakobsson, has left RIM.
Now, some might say that doesn't really mean anything for BB10 and they would be 100 per cent correct. There are all kinds of reasons he might have left. He might have been part of the reason BB10 was delayed? He might have simply not meshed with the new political landscape? He might have done what needed to be done on his end and it was time to move on?
So there may be very good reasons why he left which are not necessarily negatives for RIM.
I'll tell you why this is a HUGE negative though. It shows, yet again, that RIM has its head up its ass when it comes to PR. When your company is bleeding out and all you are trying to do is hang in there another six months, the last thing you do is turf one of the guys whose reputation is based on the mobile GUI experience.
If he's served his purpose, you tell him to go sit in some corner and work on 'future projects' for the next six months, after which he can hit the road if he wants.
Instead, when you let him walk out the door, you are adding to your negative press trend. This is not the same as letting go a VP of Sales or R&D, this is someone whose company was acquired specifically for BB10 - and even more specifically for the user experience (how it looks and flows). To let him walk out tells (or at least insinuates to) the market that BB10 is a mess, so much so that Hampus doesn't even want to stick around for its launch!
3) No Marketing What-So-Ever - Just words
Now when the stock crashed, over three weeks ago, I didn't expect RIM to come out right away with any kind of marketing effort. After all, you can't whip something up in a couple of days, and nor should you. Yet, let's remember that Frank Boulben, RIM's CMO, joined in early May. So he's been there for three full months now.
So here we are, three weeks after crash, and still there is absolutely nothing in the way of marketing. I mean, you have to put something out there. Even if its a low-res video of some super cool BB10 application. I'm not saying you have to serve a full course meal, but you have to toss out at least a bread crumb.
But instead, RIM has done nothing. They haven't changed the blackberry web site to hype BB10. They haven't been specific about any of BB10's ground breaking features. They haven't released any videos of any kind. Absolutely nothing. And let's remember, Boulben has been there three months, more than enough time to do 'something' on the marketing and communications front.
What they have done is PR - ie. give interviews. And while I congratulate them on that, PR must work in tandem with marketing, to do one without the other does not produce results (at least not in the current state that RIM is in).
4) Acquisition, forget it.
On the messaging front, RIM seems to be purposely cutting the throat on its stock. Part of what would stabilize the stock as we wait for BB10 to get to market was a speculative news cycle.
And RIM seemed to realize this at first with their CEO saying that they were pursuing all options in terms of actualizing RIM's value. The market took that to mean that an acquisition was not off the table.
A week later though suddenly RIM's CEO was knocking Windows 8.
Heins says that RIM will be using ads to help show the public what the QNX based OS can do. He took a shot at RIM's challenger for the third spot in the OS Wars by calling Windows Phone "confusing" because of the different versions of the software.
Heins has all but said RIM is not interested in an acquisition and that BB10 is the future of RIM for the next 10 years.
While all this may be true, there was no need for him to state any of this as it merely stomps out the speculative news cycle. He should have just kept his mouth shut and let people chatter about who might want to buy RIM.
The result now is that RIM is a dead stock for the next six months until BB10 comes out.
5) No speculative / value news cycle emerging
And perhaps the biggest reason for my sell, in large part due to the reasons listed above, there appears to be no speculative / value news cycle in the near future for RIM (talk about a missed opportunity - they left a crisis as a crisis instead of turning it in to an opportunity). Which means there's no reason for anyone to jump in to the stock any time soon as it is likely range bound, with a greater down side than up side.
Additionally, their failure to clean house properly, their failure to assure markets with anythign other than just words, suggests to me that everything we have heard so far is simply more smoke and mirrors.
I've said this before... if BB10 was slated for release in calendar Q4 and the delay was merely to smooth out the rough edges, then the system still remains 90 per cent done at this point. Which means that RIM should have at least a few jaw-dropping features that they could show the public right this moment. And yet RIM continues to leave BB10 in a black box that no one can see in to, with the hopes that their 'word' as to how cool it will be, will be enough to keep people waiting.
RIM's situation is not a normal one - they have a gun to their head - one foot in the grave if you will. They do not have the time to leisurely market BB10. They need to be agile, fast and engaged. And I'm just not seeing that, which is a bad sign.
My gut is telling me that BB10 must be a mess - a far bigger mess than merely needing 'rough edges smoothed out'. It's the only reason why you wouldn't showcase at least something cool and exciting about the system.
6) YouTube channel says it all
Who is RIM? Go visit their YouTube channel and it tells you everything you need to know about RIM marketing. Instead of cool BB10 related videos, they are busy posting stuff like this:
It looks like they threw a free party for a bunch of folks so they could get people smiling while using a blackberry. Just horrible, campy marketing compared to what you see out of Apple.
Boulben should be gate-keeping this stuff and not letting anything go public that is not genuinely cool and exciting. This kind of video is utterly valueless in the market and is the type of thing you see companies do who don't know what else to do when it comes to marketing - "Let's show a bunch of people having fun and holding our product, ya, that's the ticket."
I mean, its not as bad a Google who doesn't even have a YouTube channel for Android (really? how is this even possible. Google owns YouTube and doesn't even use it to market Android - crazy!).
My Prediction for the next few months?
I think there are lots of folks like myself who jumped on RIM at seven bucks and change. Who, like myself, had a thesis for how RIM could easily go higher provided RIM did x, y and z.
Like myself, I think many of them will cut their losses as it becomes clear that RIM has no game plan. for the short term.
My prediction will be that come next quarter we'll see another 10, 20 or 30 per cent sell off as poor quarterly revenues will be presented to the market with no off-setting good news (such as hype of BB10, or acquisition chatter, etc.).
Who knows, I hope I'm wrong, and that RIM starts doing the things it needs to do (sooner rather than later). But I've seen enough that I can't justify being in the stock short term. If I start seeing them do the right things, then I might jump back in at a later date.
I think RIM will be a buy at some point, but given their performance over the past month (and should it continue) I will not be surprised at all to see the stock hit five-bucks a share.
My thesis, for those who have been following, was that RIM packed so much bad news in to one quarter, that with the bad news in its rear view mirror, we would see a news cycle of speculation and articles articulating the value in RIM beyond the doom and gloom.
In addition, my thesis suggested that RIM had to start talking about the innovation in BB10 right now. In my opinion they couldn't go silent for the next three months and simply hope that consumer sentiment would not degrade further.
My thesis looked like it would play out with a one time bump up 12 per cent on Amazon acquisition speculation. In addition, Prem Watsa doubled his investment in RIM and now owns 10 per cent of the company. So it looked like a speculative / value news cycle might get off the ground (there's no reason it shouldn't have, other than incompetence, which I'll address in a second).
Now, I still think it's entirely possible that RIM shares will rise and you could make a killing on them (if only from a technical perspective). And if BB10 is a hit, the stock will soar.
There are plenty of items that make RIM attractive:
- It has right-sized the business
- BB10 puts them back in the smartphone race
- BB10 has features competitors don't
- The smartphone market is still in its infancy
- They have cash on hand, tons of patents, unique services like BBM
- They still have a strong hold in the low end market (which could serve them well if the global recession gets worse, as I think it will)
- They are still seen as the leaders in physical keyboards for smartphones
So lots of value and potential value there. The stock should be trading at $12 bucks a share based on the above.
Having said that, here are the latest developments that have made me re-think my investment in RIM and decide that, despite the value potential, it's not worth the hassle or risk sitting in this stock.
1) Rewarding Failure
 |
| Matthew Ball, Managing Director of Blackberry |
Now, who knows, maybe he had a boss that pushed the idea and Ball simply carried it out, but from the tone of the article it sounds like it was under his pervue.
Nothing against Ball as a person, I have no idea who he is to be honest, but whoever was in the charge of the Wake Up campaign should have been let go. The fact that he was promoted tells me that RIM's internal talent decisions are probably more a function of politics than accountability, responsibility and results.
If I had to guess, I suspect RIM may be cleaning house based on a 'friends don't fire friends' model (ie. if your boss likes YOU, regardless of your performance, then you're safe).
2) RIM's #1 GUI guy leaves
In 2010 RIM acquired TAT, a company that designs the user interface you get on your mobile device. As you can imagine, these guys became a critical part of building BB10. Today, TAT founder, Hampus Jakobsson, has left RIM.
Now, some might say that doesn't really mean anything for BB10 and they would be 100 per cent correct. There are all kinds of reasons he might have left. He might have been part of the reason BB10 was delayed? He might have simply not meshed with the new political landscape? He might have done what needed to be done on his end and it was time to move on?
So there may be very good reasons why he left which are not necessarily negatives for RIM.
If he's served his purpose, you tell him to go sit in some corner and work on 'future projects' for the next six months, after which he can hit the road if he wants.
Instead, when you let him walk out the door, you are adding to your negative press trend. This is not the same as letting go a VP of Sales or R&D, this is someone whose company was acquired specifically for BB10 - and even more specifically for the user experience (how it looks and flows). To let him walk out tells (or at least insinuates to) the market that BB10 is a mess, so much so that Hampus doesn't even want to stick around for its launch!
3) No Marketing What-So-Ever - Just words
Now when the stock crashed, over three weeks ago, I didn't expect RIM to come out right away with any kind of marketing effort. After all, you can't whip something up in a couple of days, and nor should you. Yet, let's remember that Frank Boulben, RIM's CMO, joined in early May. So he's been there for three full months now.
So here we are, three weeks after crash, and still there is absolutely nothing in the way of marketing. I mean, you have to put something out there. Even if its a low-res video of some super cool BB10 application. I'm not saying you have to serve a full course meal, but you have to toss out at least a bread crumb.
What they have done is PR - ie. give interviews. And while I congratulate them on that, PR must work in tandem with marketing, to do one without the other does not produce results (at least not in the current state that RIM is in).
4) Acquisition, forget it.
On the messaging front, RIM seems to be purposely cutting the throat on its stock. Part of what would stabilize the stock as we wait for BB10 to get to market was a speculative news cycle.
And RIM seemed to realize this at first with their CEO saying that they were pursuing all options in terms of actualizing RIM's value. The market took that to mean that an acquisition was not off the table.
A week later though suddenly RIM's CEO was knocking Windows 8.
Heins says that RIM will be using ads to help show the public what the QNX based OS can do. He took a shot at RIM's challenger for the third spot in the OS Wars by calling Windows Phone "confusing" because of the different versions of the software.
Heins has all but said RIM is not interested in an acquisition and that BB10 is the future of RIM for the next 10 years.
While all this may be true, there was no need for him to state any of this as it merely stomps out the speculative news cycle. He should have just kept his mouth shut and let people chatter about who might want to buy RIM.
The result now is that RIM is a dead stock for the next six months until BB10 comes out.
5) No speculative / value news cycle emerging
And perhaps the biggest reason for my sell, in large part due to the reasons listed above, there appears to be no speculative / value news cycle in the near future for RIM (talk about a missed opportunity - they left a crisis as a crisis instead of turning it in to an opportunity). Which means there's no reason for anyone to jump in to the stock any time soon as it is likely range bound, with a greater down side than up side.
Additionally, their failure to clean house properly, their failure to assure markets with anythign other than just words, suggests to me that everything we have heard so far is simply more smoke and mirrors.
RIM's situation is not a normal one - they have a gun to their head - one foot in the grave if you will. They do not have the time to leisurely market BB10. They need to be agile, fast and engaged. And I'm just not seeing that, which is a bad sign.
My gut is telling me that BB10 must be a mess - a far bigger mess than merely needing 'rough edges smoothed out'. It's the only reason why you wouldn't showcase at least something cool and exciting about the system.
6) YouTube channel says it all
Who is RIM? Go visit their YouTube channel and it tells you everything you need to know about RIM marketing. Instead of cool BB10 related videos, they are busy posting stuff like this:
It looks like they threw a free party for a bunch of folks so they could get people smiling while using a blackberry. Just horrible, campy marketing compared to what you see out of Apple.
Boulben should be gate-keeping this stuff and not letting anything go public that is not genuinely cool and exciting. This kind of video is utterly valueless in the market and is the type of thing you see companies do who don't know what else to do when it comes to marketing - "Let's show a bunch of people having fun and holding our product, ya, that's the ticket."
I mean, its not as bad a Google who doesn't even have a YouTube channel for Android (really? how is this even possible. Google owns YouTube and doesn't even use it to market Android - crazy!).
My Prediction for the next few months?
I think there are lots of folks like myself who jumped on RIM at seven bucks and change. Who, like myself, had a thesis for how RIM could easily go higher provided RIM did x, y and z.
Like myself, I think many of them will cut their losses as it becomes clear that RIM has no game plan. for the short term.
My prediction will be that come next quarter we'll see another 10, 20 or 30 per cent sell off as poor quarterly revenues will be presented to the market with no off-setting good news (such as hype of BB10, or acquisition chatter, etc.).
Who knows, I hope I'm wrong, and that RIM starts doing the things it needs to do (sooner rather than later). But I've seen enough that I can't justify being in the stock short term. If I start seeing them do the right things, then I might jump back in at a later date.
I think RIM will be a buy at some point, but given their performance over the past month (and should it continue) I will not be surprised at all to see the stock hit five-bucks a share.
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