Research in Motion (RIMM) Down But Definitely Not Out (undervalued techstocks, competition, blackberry 10)

      Research In Motion sold 260,000 playbooks between March 3 and June 2 of 2012 which though down quarter to quarter, is still one of the best quarters for tablet sales since their launch one year ago (500,000 in 4q12, 150,000 in 3q12, 200,000 in 2q12 & don't forget that playbook now owns 15% of the Canadian tablet market up from 5% in early 2011); Also, keep in mind that the less popular 16 GB playbook is being discontinued. RIM has yet to unveil the rumoured 10 inch model meaning that the company literally had NOTHING NEW to offer last quarter but still did reasonably well on the sales front. Only recently has the company allowed blackberry messenger users to view facebook and twitter updates so the full impact of that on sales won't be realized until another quarter. Remeber also that earlier this year sales of BlackBerry phones rebounded strongly after one of the worst quarters in company history.
Signs pointing to a recovery in stock price: July 2, 2012 Hudson Square upgrades RIMM to buy from hold consequently establishing a price target of $10 or 33.9% higher than now (July 3 start of trading). Also note that Lazaridis, one of RIM's biggest shareholders with 30M shares or 5.6% of the company (last major purchase was for 3.1M shares back in February) has not been a seller, indicating his confidence in a recovery.  Oct 31 through Nov 4 share price up +14.5% to $8.71 giving it a market value of $4.56 billion (Nokia up +3.0% to $2.80).

September 2012 Update:  For the three months ended September 1, 2012 Research In Motion posted better than expected results.  Although the company's bottom line remains in the red at -$235 million or -$147 million adjusted (27c/share) the loss is 43% lower than the expected -47c/sh.  In the two quarters prior RIM lost $518m (-99c/sh) and -$125m (-24c/sh) respectively.  Despite not releasing any new products, RIM's quarterly revenue was up +2.10% from the previous quarter at US $2.873 billion.  Negatives : 2013 second quarter cash flow was only $432 million $278 million less than in the previous quarter.  Shipping volume for smartphones was 7.4 million down -5.1% from the previous quarter.  As of September 2012 BlackBerry subscriber base is 80 million (+2 million last three months).

Financials : The Good News
$2.2B in cash equivalents + short & long term investments = $100M more than it was at the end of the previous quarter. That means that in the short term, RIM does not have to part out portions of its business (like Nokia is doing with Microsoft) to survive (why I especially don't think the company will give up either of its two core units, hardware or services, afterall it didn't consider selling either six months ago when the stock was worth 60% more).
The adjusted earnings loss in this first quarter of 2013 is actually a first for RIM (-$192M or -37 cents a share). In the prior quarter adjusted net income was actually $418 million which isn't bad considering Nokia went through a number of quarterly losses before investors punished the stock.

Subscriber base up +1M to 78 million giving RIM's cash flow a stronger foundation.
The last two quarters provided a combined unadjusted net loss of $643M only about a third as much as Nokia ($2.01b) even though RIM launched NO new products but Nokia had its Lumia 900 (2 million units sold up from 1 million last year).
Research and Development spending was almost identical to the November quarter of 2011 ($368m) but down only slightly q2q from $386m (March 2012 quarter), not bad considering it had 33% less revenue to work with ($2.8b vs $4.2b). Services (bbm, etc) accounted for 36% of revenue up from 27% in the previous quarter.

Research In Motion is trimming its workforce by about 5000 but that includes job cuts through to the end of 2013 (the quarter BB10 is released) so the good news here is that this is rock bottom ! Job cuts will save the company one billion dollars a year.
BlackBerry Jam (began last month, May 2012) aims to improve blackberry app world by bringing together industry leading application developers in order to help them innovate and get their products to market faster (one of the attractions for app developers is the fact that the top 10% of vendors are making more money at BB app world than at Android or even Windows).

RIM vs Nokia
Including the half a billion dollar loss in this quarter, RIM profited +$556 million over the last 4 quarters, so operating losses are still relatively new (by contrast Nokia lost -2.437b in 52 wks ending March 2012).
RIM sold $1.6 billion worth of devices (7.8M/260th playbooks); Nokia sold $4.2 billion worth of devices (83M cellphones, 12M smartphones). Nokia avg selling price for devices: €51, RIM avg selling price: ~ $200.

RIM's enterprise server/security platform (playbook first to be approved by the US government) basically makes it a major player in the corporate market regardless of how well developed or freely accessible its app market is (BlackBerry used by 90% of fortune 500 companies, on June 26,2012 the UK government approved use of blackberry security software important since the blackberries now offer mobile voice solutions; this is just one of many such approvals the long term positive effects of which are enormous).
In the latest quarter RIM shipped 7.8 million smartphones which is only 3.1 million less than Nokia (by contrast at this point last year the difference was closer to 10 million). 7.8 million is low but not THAT bad considering sales weren't that much higher at 10.6 million in the quarter nine months ago (and recovered in the following quarter when sales improved to a near record high of 14 million). It made $1.652 billion from the sale of 7.8 million phones and 260,000 playbooks. Comparing that to the $3.066 billion it made in 2q12 from the sale of 10.6 million phones and 200,000 playbooks indicates that the average selling price of a BlackBerry went down since then. I'd put the average playbook price at about the same as the phone (remember, the company now sells playbooks at $199-$299 down from over $500 earlier last year). That comes out to around $206 per device or 29% lower than the average selling price of a blackberry 7 phone earlier in the year according to Abramsky. You have to think, how much profit can RIM make from the next generation phones ? especially considering the vast amounts of features they're going to have.

Refering to the BB10 phones CEO Thorsten Heins said that he's confident they'll provide "a ground-breaking next generation smartphone user experience". The delay in launch is due to the time consuming process of integrating key features which RIM has had success developing (main carriers of the BB are more than satisfied with the platform).

Financials : The Bad News

If you're an investor then be prepared for a wild ride over the entire fiscal 2013 period, and it's only the 2nd quarter ! Operating losses, though still new at RIM, won't end until after we witness the consumer markets response to BlackBerry 10 qnx phones. That's quite a risk to take considering you're going to have to support a company bleeding money for the next nine months and then you have to hope that BB10 (aka BBX) will be THE gamechanger (by that time a slew of new android phones will have already hit the market, each better than the last).
If it were me, I'd take the risk. You see, it was only last month that the US military committed to buying more blackberry devices, which instantly validates the company's security, platform and features. The military, among other DoD and enterprise customers, was particulary impressed with enhanced features on the newest model 7 phones (near field communication technology/voice activated search) and with mobile payments facing increasing scrutiny from government lawmakers, blackberry's devices are already government approved (security) and that could mean a lot in the future.

Companies Piquing Interest Research in Motion RIMM, Transforce TFI, McDonalds MCD

Research in Motion (RIM in Toronto, RIMM on Nasdaq)

  The maker of the BlackBerry smartphone has seen heavy trading volume ever since January 25, the day Toronto-based investment firm Fairfax initiated its purchase of 14.1 million RIM shares for $400M which raised its stake to just over 5.1% (about the same as what's held by RIM founder Balsille).

That same day outgoing RIM Chair, Lazaridis upped his interest by 3.1 million shares (over $50M worth) bringing his total up to 30M shares (5.6% of company). Volume of trading in shares of RIMM (Nasdaq) has ranged from 1.5X to as high as 5-6X the average.
The company still trades 18% below book value which isn't fair given that the book value of the company actually went up last quarter consequently the stock price continued its descent. As well, RIM has not lost its title as market share leader in South Africa 70% (2nd is Nokia), Canada 35.8% (in November among platforms, leading Apple which is just over 30%), Indonesia 46% (3Q2011 up from 40%, 2nd is Android at 29%) and Latin America 25.6% (2nd is Samsung at 23%).

In my opinion, the company is being valued at a price uncharacteristic for tech companies. Take Book Value Per Share for example; Feb 9, 2012: RIM's 0.83X is much lower than Apple 4.94X, Google 3.41X & even Nokia 1.12X, Motorola 2.36X; RIM's book value per share of 0.83 on Feb 9, 2012 is near a record low, only one year ago on Feb 28, 2011 it was 3.88X.

P/E ratio continues to be under 4.0 which remains much lower than competitors Motorola and Nokia, companies that are also losing market share in the U.S. to Apple and Android. In my opinion the market is giving rim's 2012 QNX product launch NO respect meaning that the next generation blackberry phones don't need to be groundbreaking for the stock to capitalize. RIM has had years to work on development and its research and development spending is comparable to Apple's (doesn't even take into consideration the 2010 acquisition of QNX) and has been going up (+3.4% to $369M last quarter).
Apple losing market share in Germany, France; In the three months ending November 2011 Apple's share of the smartphone market in Germany slipped to 22% from 27% subsequently in France it declined to 20% from 29%. Opportunity for BlackBerry ? Perhaps, but it still must contend with Android which leads by a significant margin in Germany where's it's at 61%.
Update : On February 14, 2012 it was revealed that Greenlight Capital Inc bought more shares of RIMM (total investment in technology stocks increased by 8.1%). During the same quarter, Leon Cooperman's Omega Advisers bought 1.51 million shares doubling its position. 2012 earnings estimate for RIM puts eps at $2.92.  Week of February 27, 2012 Wordpress releases an app that makes updating and creating content easier to do for PlayBook users.

RIM recently showed off what the QNX platform can do in a concept Porche. All of the systems in the QNX platform are available to auto manufacturers, which can tailor the technologies to their own specifications, so in the future RIM's business might not be limited to just handheld devices. The next generation of QNX auto will be more auto-centric and based on HTML5. Also of note: An NFC chip makes it possible to link a blackberry phone to the car. The console allows for easier navigation and better sound quality!
Over the last month RIMM was up over 9% but the stock has severely underperformed in the long term, -12% last three months, -24% last six months meaning there's still a lot of room to grow (even Nokia is up over 6% last six months). In the short term the overall trend seems to be up for tech companies so I'd expect the same for Research In Motion.

*RIM recently received FIPS 140-2 certification of its BlackBerry 7 smartphones. The award emphasizes security and is issued by a Canadian agency.
*November 14, 2011: BlackBerry 7 phones awarded common criteria EAL4+ Certification meaning that the combination of security mechanisms and product design meets the highest level of accreditation. This applies directly to the BlackBerry® Bold™ 9900, BlackBerry® Torch™ 9810, BlackBerry® Torch™ 9860 and BlackBerry® Curve™ 9360
*Carriers such as Sprint still refuse to carry the Playbook despite it being recommended by the US federal government and BlackBerry already being ingrained in the corporate market through mobile enterprise. Much of the 42% growth in tablet sales in 2012 will come from outside North America where companies rely less on Sprint for marketing. I think that will play well for RIM which currently has only 1% of the tablet market. Currently, RIM's tablet business only makes up 0.2% of the company's stock price (by comparison phones are 52%, according to trefis). Also of note: 18% of Apple's share price comes from cash net of debt, comparable to RIM's 17%. The iPad contributes 12.7% of Apple's price.
*Revenue outside the U.S., UK, and Canada was up 48% over the last three quarters of 2011 to US$8.24B. That compares to a revenue decrease of 44% in the United States. I think that the future of the smartphone market is outside of the USA (smartphones are already becoming commonplace there unlike much of the developing world like Indonesia and even Brazil where bandwidth remains constrained). Investors are undoubtedly overly concerned with the American market rather than looking at the global picture. More info at RIM & BlackBerry still leaders.

Transforce (tsx:TFI)
Canada's biggest trucking company and one of the five biggest in North America. It's not afraid of making acquisitions. Over the last year it has become a player in the United States through acquisitions Dynamex ($248M) and IE Miller Services (Nov. 2011, $138M in annual revenue). It has also become a major player in the oil and gas sector where it now operates oil rig transporters/oil field terminals in both Alberta and North Dakota (shale).

Also to consider before choosing this company:
*Canadian trucks have FULL ACCESS to US roads.
*Transforce dividend in this current fiscal year is on track to be at least 12-15% higher than last year (45c vs 40c, could be more if the final quarter shows new growth). That's significant considering the company's annual dividend has been stagnant the previous two years.
*TFI stock as traded on the Toronto Stock Exchange is up 28% last 3 months, 34% last 6 months.
*Revenue for the quarter ended September 30, 2011 was $742.98M 32.4% higher than the quarter ended March; quarterly revenue had been stuck between $500 and $560M for a number of quarters prior to that. As compared to the March 2011 quarter the September quarter earnings per share did not increase HOWEVER dividends were up by 25% !

McDonalds (nyse:MCD)

6.7% overall increase in same-store sales in January 2012; 7.8% increase in the USA, 7.3% increase in Asia, 4.0% increase in Europe (any growth in Europe is a positive sign considering the region's economic turmoil). Even more, without considering the changes in currency same-stores sales showed an overall increase of 9.1%. The 7.8% increase for the USA compares to just 3.1% last year which bodes well for the US market. Other notes: Results from Russia are included in the category for Europe. Sales from franchisee operated locations (80% of the 33,000 locations) are only considered in system-wide sales not in company revenue.

In the quarter ended December 2011, McDonalds revenue was $6.8227 billion up 9.80% from 4Q2010 but down 4.80% from the previous quarter, profit was down 8.7% q2q HOWEVER dividend per share was 14.75% higher than the previous quarter at 71 cents. Remember too that McDonald's dividend had been the same quarterly for over a year before the latest quarter when it went up to 70 cents from the usual 61 cents. The company profited 1.376B in the December quarter and $5.503B on the year. Fiscal 2011 revenue +12.1% on the year compared to only +5.85% in 2010 and -3.306% in 2009 so the long term trend is also a source of optimism.
Your next question is probably how's the stock doing. Very well, it's up 1.7% last 5 days, been stable over the last month, but 5.76% higher over the last 3 months. Long term: +21.85% last 6 months, +32.76% last 12 months, +124.63% last 5 years, +274.44% last 10 years. Both short-term and long-term performance is great which bodes well for investor confidence. I also like how diversified McDonalds has become. It is less reliant on the US market than it ever was before. How many other companies get 68 million customers in 119 countries every day ?

McDonalds has also been busy renovating stores, in Canada at least. The company has already begun its $1 billion 2012 effort to modernize 1,400 locations across Canada.

Bombardier (tsx:BBD.B) led the Toronto Stock Exchange in terms of volume trading on February 8, 2012. The volume was 8,862,715 shares.

Gold Investing  On Feb 9, 2012 Warren Buffet argued against owning gold in an article posted on Forbes.  He raises some interesting points but in my opinion the assessment makes assumptions that aren't relevant today.  Didn't give enough examples of when cash wasn't king as was the case in the 1930's.  Also fallacious:  Noone is able to choose Pile A (all the world's gold) and Pile B (all the world's crop land).  Simply stated, it's unrealistic.

Also, consider that 64% of Ron Paul's investments are mining stocks.  UBS: 22% of central banks consider gold the most important reserve asset for the next 25 years.  Billionaires like George Soros are investing in gold like never before.