In my previous write-up on Research In Motion Ltd (NASDAQ:BBRY), I spoke of the phone-maker’s recently-announced fourth-quarter and full-year performance. I believe the company posted encouraging results as it came above analyst expectations regarding bottom-line growth and Z10 sales numbers. Now, let me discuss a few factors that I believe will keep Research In Motion Ltd (NASDAQ:BBRY) floating (i.e. not force many of you to write it off yet).
When talking about factors that will help Research In Motion Ltd (NASDAQ:BBRY)’s sustainability and growth, we must distinguish between core and complementary factors. For this phone-maker, the core factor would have to be the BlackBerry 10 platform and its devices, while the complementary factors will comprise the BlackBerry 7 platform with its devices, apps on BB10 (though this may be considered as core), and everything else.
The core
Not many people believed in Research In Motion Ltd (NASDAQ:BBRY) and they were expecting the company to post a terrifying result. However, despite the odds, the phone-maker did what it had to do. It jumped out of the downward spiral and gave its stakeholders hope for a brighter tomorrow. In a span of just two weeks, and with limited geographic availability, Research In Motion managed to sell as many as one million Z10s. Why is this such a great feat? The U.S. accounts for almost three-fourths of Research In Motion’s market, yet new devices were available only in UK and Canada and were made available in the U.S. only after the quarter ended. So, with 75% of the market being absent, the Canadian company was able to pull this off.
Secondly, now that the devices are available worldwide, reviews from all over the globe have started coming in, and it seems that initial consumer sentiment is positive as consumers perceive the devices to be quality products. In fact, saying that the feeling is on a positive side would be an understatement. On average, users have rated the phone better than the Apple Inc. (NASDAQ:AAPL) iPhone 5, the Samsung Glaxy S IV, and Nokia Corporation (ADR) (NYSE:NOK) Lumia 920. The demand for Research In Motion Ltd (NASDAQ:BBRY) devices in the UK has been so huge that more than 50% of the overall outlets reported sold-out.
Thirdly, now it seems that the BlackBerry Z10 isn’t even the most-awaited BB10, yet the numbers are inspiring. Research In Motion is well-known for both simple and effective QWERTY physical-keyboard devices and security features, and any typical Research In Motion fan-boy would want both things together. This is where the Q10, the physical-keyboard version of the Z10, comes in. There are hundreds of Research In Motion users who passed on the Z10 and are waiting to get their hands on the Q10 when May comes. The company recently started the pre-orders for the Q10 in Canada and the response from the major carriers are overwhelming. So, once the Q10 hits the streets, you can only imagine the sales volume that the company might report.
Research In Motion Ltd (NASDAQ:BBRY) got the ingredients right this time. The Z10 can be said to be the best phone from the Canadian phone-maker, and several analysts are of the opinion that it has a great change against the iPhone. While iPhone 5 continues to be the most popular smartphone on the planet, some consumers are actually not very happy with the iPhone 5. The Apple Inc. (NASDAQ:AAPL) device still has a decade-old user interface, though there have been small tweaks related to icons and backgrounds. On the other hand, there’s the latest Z10, which has some very innovative features like distinguishing work and fun home screens. In terms of handset quality, the Z10 leads. While the iPhone 5 sports a four-inch display with a 640 x 1136 resolution, the Z10 offers its users a 4.2-inch screen with a 768 x 1280 resolution. Even the pixels-per-inch are higher in the Z10, at 355 compared to 326 on the iPhone 5. These are few things that might attract a lot of prospective buyers.
Even Nokia Corporation (ADR) (NYSE:NOK) should feel threatened by the increasing demand of the BB10 platform. Previously, Nokia faltered because of the Symbian OS and then decided to go with Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone OS. Now, if the company’s choice of OS turns out to be wrong again, the Finnish phone maker is sure to be doomed. Android stands for fun and affordability, iOS stands for elegance, and BB stands for work (and now fun, too). But, it’s not clear what WP8 stands for, and this is where Research In Motion Ltd (NASDAQ:BBRY) can outsmart Nokia. If Research In Motion is able to position itself as a phone-maker for the business class, as well as the young, socially-inclined population, it will surely give Nokia Corporation (ADR) (NYSE:NOK) a run for its market share.
All these factors, when bunched together, clearly point to strong growth potential still in Research In Motion. Moreover, Research In Motion is in the midst of refreshing its product line and soon there will be many more BB10 devices at different price levels, and this is surely going to provide a great boost to the company’s growth.
The complementary
Though BlackBerry 7 has become old and, some may also consider, stale, it still hasn’t stopped feeding the phone-maker. Not everyone can afford an iPhone, Galaxy Note II, S IV, or even a Z10 for that matter. So, what to do with that segment of the market? The obvious answer is to offer something that’s second in line, the BB7 in this case.
In fact, this strategy is not at all new and is already being followed by Nokia Corporation (ADR) (NYSE:NOK). The Finnish phone-maker’s partnership with Microsoft Corporation (NASDAQ:MSFT) may have resulted in the existence of Lumia devices, but Nokia hasn’t abandoned its Asha series of almost-smartphones. Nokia very well knows the purchasing capabilities of developing economies, and thus Asha series continues to be a strong growth strategy for the gradually recovering giant. Again, Apple Inc. (NASDAQ:AAPL) may be catering to the high-priced smartphone market segment with its iPhone 5, but it’s also using its iPhone 4 and iPhone 4S to cater to several other geographic areas and other user-categories who will find it easier to buy these slightly older models.
Another factor that will keep Research In Motion Ltd (NASDAQ:BBRY) from falling is its top-notch security features. To date, Research In Motion holds the ace position when it comes to mobile security and this, surely, isn’t going to change over night. Apple Inc. may have a very attractive platform, and Android may have its charms, but none of the two can match Research In Motion Ltd (NASDAQ:BBRY)’s security sophistication. In fact, Apple and Google Inc (NASDAQ:GOOG) are attempting to get access of the BBES10 for their customers. This possible partnership could act as another steady revenue source for the Canadian phone-maker.
Research In Motion Ltd (NASDAQ:BBRY) is also working relentlessly to add new and exciting apps, as well as get the already-popular apps onto its newest platform. At the recently held Game Developers Conference in San Francisco, the company pitched that Research In Motion devices aren’t just business devices anymore (though they used to be considered such at some point in time) and Research In Motion users are as active on social forums as iPhone and Android users. The company claims that porting games and apps to BB10 is simple and cheap, thanks to cross-platform gaming tools provided by Research In Motion-owned Scoreloop.
Lastly, Research In Motion Ltd (NASDAQ:BBRY) has a very strong financial position with a huge amount of cash on its balance sheet. Several analysts are of the opinion that Research In Motion is in a better situation, compared to several of its peers, when it comes to financial leverage. The company can use its abundant cash to fuel much-needed research and development and also to promote its new platform. Looking at Samsung, we can say that’s clearly not a bad idea. Samsung made its way to the top by relying hugely on its marketing muscle (other than making some really quality products), which spent huge amounts to make the Galaxy devices popular and omnipresent.
Beating the app problem
While some may feel that the platform stands little chance against iOS and Android, primarily due to lack of apps, I feel the logic isn’t strong enough. It’s true that not all popular apps are available on the BB10 at the moment, but the question is, how many apps do people use on a regular basis? BB10 may not support Instagram and Netflix, but it already supports several other top-used apps like Facebook, Tweeter, Google maps, Whatsapp, and many more. I feel these are enough to keep socially active users engaged and interested.
Furthermore, Research In Motion Ltd (NASDAQ:BBRY) doesn’t serve the U.S. alone. So, while U.S. users may miss Netflix, users from the rest of the world won’t be bothered by the inclusion or the exclusion of the app. Again, Netflix not being available may just be a temporary problem until the company and the developer works out a solution.
Final thoughts
Over the past few weeks since the Z10 was launched, there have been huge changes in the investor’s perception, and even analysts and industry experts are expecting better from Research In Motion now. Morgan Stanley now has a price target of $22 for Research In Motion, up from its previous target of $10, and this represents a 49.7% rise over the current price of $14.7 (as of this writing). Morgan Stanley believes that the shift to BB10 will lift Research In Motion Ltd (NASDAQ:BBRY)’s gross margin to 33% in February, up from 31.6% in November 2012, and also expects BB10 to reach the break-even point in its fiscal fourth quarter of 2015.
So, I’m clearly not the only person who feels positively about this stock. All of Wall Street is now looking forward to the company’s fiscal 2014 first-quarter earnings release, which is three months away, since that would also include U.S. and worldwide sales numbers for the Z10 and Q10. I’ve already outlined factors that I believe are going to help Research In Motion Ltd (NASDAQ:BBRY) get through its rough patch, and I feel investors can benefit from this present opportunity, as now would be a great time to initiate or add to your positions in Research In Motion.
Rahul Chattaraj has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.
