RIM Is Not Dead Yet

News of the big drop in RIM’s profits has many people predicting that RIM will suffer the same fate as Nortel. It’s understandable that Canadians are concerned about the future of a Canadian high-tech success story like RIM after they watched in disbelief as Nortel failed. However, there is a big difference between RIM’s financial results and Nortel’s.

In the past three quarters, RIM’s profits have been $934 million, $695 million, and $329 million. This is a disappointing trend, but keep in mind that they still have profits. Nortel had massive losses over the course of a decade before they finally speared in. There is a big difference between lower profit and negative profit.

To draw an analogy with retirement saving, consider Rick who has added the following amounts to his RRSP over the last three quarters: $9340, $6950, and $3290. By contrast, in 2001 Nora withdrew $257,200! Rick has reason to be concerned about his trend, but Nora is speeding towards a brick wall.

I have no idea what will happen to RIM’s business in the future, but there are no similarities between their finances and Nortel’s finances yet.

Comments

  1. Big Cajun ManSeptember 19, 2011 at 6:27 AM

    True about RIM actually making profits, the concern I have is that they started from a point of strength, and now they are constantly on the defensive. There is a chance for them to make a comeback, but they are now in a real battle with some big tech foes.

    ReplyDelete
  2. AnonymousSeptember 19, 2011 at 11:16 AM

    The profits and revenues, unfortunately, have been masking a fundamental problem with RIM: They don't have very compelling products. Their chances of a comeback are, unfortunately, somewhere between slim and none. It wouldn't matter if QNX is technologically superior to either iOS or Android. Without apps and content, technical superiority is moot. To make it worse, QNX is still months, if not a full year, away from handsets, and neither Apple nor Google are going to be sitting still.

    RIM is facing a problem similar to what GM and Chrysler encountered: it's the products. Few people want them, and no one is willing to pay a premium. Their position in the enterprise, once thought unassailable, is under attack, primarily by iOS. Their product problems start at the top, with Balsillie and Lazaridis, who continue to view these devices as "phones with smarts" rather than "little computers that make phone calls". That mindset won't change while the senior management structure is what it is. Without a serious shift in culture, RIM will tread water, but the waves will continue to get higher and higher. At some point, the finances will start to reflect the realities of their place in the market.

    ReplyDelete
  3. Michael JamesSeptember 19, 2011 at 1:20 PM

    @Big Cajun Man and @Anonymous: I don't claim to have any useful insight into RIM's future. Your analyses may well be correct. My main point is that they are still in a strong financial position -- a very different position from Nortel's in their final few years.

    ReplyDelete

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