The company’s last set of results were record breaking, with sales this year
expected to be more than triple the $6bn made three years ago. Yet the stock
is bargain-basement cheap: it trades on eight times prospective earnings,
less than half the multiple of Apple and serial disappointer Nokia. Shares
can be had for a third of their 2008 high.
Indeed, the tablet launched on Monday is important only because it is
symptomatic of problems at RIM. It is not clear whether the company’s ideal
customer is an executive travelling to a meeting, or a teenager messaging
friends and playing games. And if the two markets are merging, RIM is far
behind Apple and Google in building a community of software developers
designing apps for their smartphones.
For now, a few simple changes might assuage some shareholder grumbles. RIM’s
board could decide which of its two co-chief executives is the leader. Once
picked, he could start to articulate a clear and preferably simple strategy
– perhaps the aggressive pursuit of emerging market growth and a realistic
long-term target for margins. Improving disclosure and paying a dividend
would also suggest a reassuring level of financial discipline.
However, the mobile phone industry’s short history is a tale of rapidly
shifting market shares and fat margins abruptly becoming thin. In the year
to February 2006. RIM’s operating profit was 30 per cent of its $2bn sales.
This year the consensus forecast is 21 per cent, and it is expected to
continue falling as sales growth slows. Until shareholders are convinced the
decline will eventually stop, the shares are staying cheap.
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