Even as Research In Motion’s glitzy annual conference drew to a close amid praise for its new operating system, the BlackBerry maker’s shares plunged to their lowest level in almost nine years.
BlackBerry World, along with the BB10 Jam developers conference, attracted over 5,000 people from around the planet to get a sneak peek at the company’s long-awaited new BB10 operating system, as well as attend technical seminars and strategy sessions. Many liked what they saw.
But RIM’s shares continued to take a battering. For the third straight day Thursday, the company’s shares were off by more than 5 per cent. By 2:15, they had slipped 70 cents to $11.93, after earlier falling as low as $11.77.
So what, if anything, does the company need to do over the next few months to win back some credibility on the markets? And why has the stock been plunging almost from the moment CEO Thorsten Heins showed off some of BB10’s nifty features in his keynote speech Tuesday morning?
Why the fall?
A brief run-up in the stock price before this week came because some people were looking for RIM to announce something relatively-earth shattering: A strategic partnership with another company, a firmer, earlier release date for the first official BB10 phone, or a decision to license RIM’s software to other companies. None of those happened, pointed out Michael Walkley, an analyst at Canaccord Genuity.
“I think some investors had been hoping for some major news this week, and were disappointed when they didn’t buy it,” said Walkley.
Not only did RIM not announce any licensing agreements, Heins ruled anything out until after BB10 was up and running. That’s a major strategic mistake says Peter Misek, of Jefferies and Co. If the launch isn’t a success, the company would then have perilously little bargaining power in any licensing talks, Misek says.
“That’s a big gamble to take with the company,” said Misek, who’s also concerned about the company’s existing stock of BlackBerry 7 devices which haven’t been sold.
“The message seems to be ‘you’d be a fool to buy a BlackBerry right now, because BB10’s so great, and BlackBerry 7 devices won’t be compatible.
Some of the fall may have also been prompted by so-called technical selling after it broke through its 52-week low, another analyst suggested.
What can they do?
Moving up the anticipated fall launch date of the first BB10 phone would be a start, said Walkley.
“A late fall launch date has them going head-to-head with the iPhone 5, and that’s going to be hard to do,” Walkley said.
It doesn’t sound like that’s in the cards, however. Heins insisted in a meeting with journalists Wednesday RIM won’t be rushed into releasing BB10 earlier than it plans to.
“I’ll stick to my guns. Quality matters. I want BB10 to be perfect,” said Heins. BB10 is based on software from QNX, an Ottawa-based company RIM purchased in 2010.
Misek agrees that moving up the BB10 launch would help. The only other two things he sees making a difference in the company’s share price would be a licensing agreement – or at least the firm promise of one – soon, or the company being sold, which he believes isn’t close to happening.
The Apple model
It’s not the first time a tech company has taken a beating on the market, Misek pointed out. While Apple may today be the biggest company on the planet by market capitalization, “the sentiment was very negative, and they almost filed for Chapter 11, and that was while Steve Jobs was there,” said Misek.
Apple turned things around with almost-constant innovation and rapid-fire product launches.
What about the marketing?
Hiring a new chief marketing officer – which Heins said this week he’s “very, very close” to doing – could be a shot in the arm, but they need to hit the ground running, says John Pliniussen, a marketing professor at the Queen’s University School of Business.
Rather than waiting until BB10 is launched, whoever is hired needs to quickly lure customers back. Sales incentives, such as cutting out subscription fees for six months, could be a start (although that would require working out an arrangement with telecommunications carriers). So, said Pliniussen, would letting people know that if they buy a BlackBerry now, it would have a trade-in value for when BB10 is launched.
Will any of it matter?
Even if BB10 is the greatest thing since sliced bread, it’s going to be hard for RIM to turn around its market share, and thus its future and stock price, said Walkley.
“We think they’ll probably drop below 5 per cent of world smart phone sales in the August quarter. It’s hard to turn that around,” said Walkley, who also estimated roughly 99 per cent of the profits in the smart phone industry come from just two companies – Apple and Samsung.