In mobile platforms all the hype actually is on Apple and Android (Google). Their market shares are rising quickly in the US. For the CEO of Apple Steve Jobs, ““We’ve now past RIM, and I don’t see them catching up to us in the near future.”
Balsillie co-CEO of RIM answered: ” The implication being that RIM practically invented the smartphone category and is not going anywhere.”
RIM has a different attitude toward web apps than Apple. There may be 300,000 apps for the iPhone and iPad, but according to RIM CEO, the only app you really need is the browser. “You don’t need an app for the Web,” he says, and that is equally true for the mobile Web. Blackberry is betting heavily on the Web, similarly to Google.
Positive aspects:
-New RIM mobile ad network : good potential.
-New potential of Playbook blackberry tablet; cheaper than the iPad, but 3 to 4 times faster than the iPad. It will be launch at the beginning of 2011 and support Flash applications.
-Potential in new emerging markets: RIM smartphones are better value with BB messenger : free real-time SMS and lower cost of smartphone. In Latin America and several part of the globe, the majority of users are prepaid users who can’t benefit from subsidies on the smartphone or from long-term contract.
Negative aspects:
-RIM position on development of apps. For co-CEO Balsillie, people prefers mobile web to native apps. When the difference is un-significant it is true, but unfortunately it is not always the case. One big example: www.youtube.com on mobile doesn’t play all your videos. The free app plays videos of the day but you can’t search that you want in the library. The $2.99 native app let you play the videos of your choice.
-RIM is losing market share mainly in the US over Apple and Android.
Outlook
Even with global market share shrinking slightly the stock is cheap, so the short term potential is good. Will RIM be a major brand and mobile platform in 10 years? I’m not so sure in the US for the consumers sector but it will remain an important player in the business sector. However, the company has competitive advantages in the emerging markets. It offers a good ratio quality/price for these customers.
With a P/E ratio of 11.1, the stock seems cheap. The global smartphone market is growing quickly.
Apple P/E ratio is 19.91, less if you consider the $51 billion in cash and has the momentum, but the question is can it maintain its higher valuation in the medium and long term? I remember my economist teacher who said 14 years ago that in the tech sector, you can’t hold many tech stocks for the long term. You have to trade more often. 2 stock crashs later he had a good point.
Apple's mobile ecosystems growth are remarkable (you can see the second graph), but the valuation of the firm is actually taken that into account. RIM valuation is not taking completely into account all of these growth factors.
Louis Rhéaume
Infocom Intelligence
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