Wow a company the is posting record profits, record sales is dead AND you are comparing it to devices that came out BEFORE the iPhone.
You think RIM has nothing left and they are just going to stop innovating altogether? Apple is not the only company to push an industry forward. People need to be a little less bias and little more open to realize no one device is perfect. you talk like the iPhone will have monopoly in 3-5 years wow, a bit of a stretch don't you think?
Come talk to me when you can record video on your precious phone.
LOL. Record Video is what is holding back the iphone then huh. Good luck with that statement holding any water at all. And yes, RIM is doing record sales, and this is exactly why I think it will fall very hard.
RIM has a P/E of 63 intraday today. You might not be into stocks the way I am, so let me explain a few fundamentals. P/E means Price to Earnings Ratio. Right now, RIM is trading at a value 63 times greater than its earnings support.
If you wanted to buy a business, they'd not sell it for what the company makes in a year or even two years. Perhaps not even 5 years. So imagine you want to buy the corner store that sells sodas and candy to kids. The sale price of the store is likely 5 to 10 times its earnings potential. You as a buyer are investing. It's long term. So the store would perhaps sell at a P/E of 10 to 1. Some 5:1 some even less. It depends on the market.
Let's go back to RIM. RIM is 72% owned by large institutions. This is because of it is considered to be a stable company. It doesn't make big changes either way. Kind of like how IBM is now. Or even Microsoft. They pretty much stay the course. But these investments companies make in other companies can shift. They can easily say, gosh, RIM is trading very high right now, and they kind of have all their eggs in one single basket. All they do is this phone thing. So if that one market dips for RIM, the entire company dips accordingly. And so these institutions might decide it would be best if they put their funds into companies that can weather a SmartPhone change in the industry. If Android and iPhone start to pull interest away from RIM, they will be in trouble, and in a very quick way. I'll explain.
When you have a P/E this high, it means that the investment community believes you are growing. And as you rightly pointed out, RIM is growing. They have record profits. I'm not saying they don't. What I am saying is that they are volatile. What I mean by that is this. The P/E suggests growth is the norm. RIM is "Expected" to grow. So if they flatten, or stop, guess what happens to the trade valuation of RIM? Seriously, take a real honest guess. The answer is, they will go through what is called a "correction". They will drop in stock value, thus valuation because they will adjust to the reality that RIM is not growing at the rate they once were, if at all.
Now, what I am about to write is a leap.
When you flatten, or go through a correction, it's darn near impossible to rise up again. And I submit to you that RIM will go through a correction. I believe interest is in trouble. I believe the iPhone will hit them a little in the beginning, and then gain momentum. I believe Google's Android platform will hit them a little and then gain momentum. And I think even Windows Mobile will step up and hit them a little and then a lot.
The reason is, BlackBerry has an dated foundation compared to what we see going on today. They are in the same boat Palm was in when Windows Mobile first released. Palm was the unstoppable force. Look at them today. What the heck happened? Simple. They were dated and refused to believe it. Palm splintered its business. Tried to adapt by offering Windows Mobile on some of their hardware. RIM will need to do the same. If they don't, they will go through what Palm is going through. It's not that much of a leap. We see this all the time.
What about Wall Street?
Wall Street is good at one thing. They look at yesterday, and today, and the forecast for tomorrow. They don't look at much else. And that's why we have a correction. If you look at any stock chart since the beginning, you will see what I am saying. The stock will have a jagged line going up or down, and then, BAMM. You see a sharp drop. A cliff. This is the correction. They all go through it. Why? Because Wall Street doesn't exactly look at what I am talking about. They don't really factor in the competitor until it becomes a reality on paper. And so you see a sharp course change, which is the correction.
The more RIM rises in my opinion, the harder it will fall. I write that because I believe in my bones that Android, iPhone, and Windows Mobile are about to take center stage. And I believe RIM is heading for a correction. And when it does hit that correction, mark my words, they will drop half their value almost over night. And that will have a domino affect on RIM, and your warm happy thoughts of their company and business model.
RIM in my opinion is merely Palm 2.0.
Alex