Verizon iPhone Makes RIMM Top Short Play

The iPhone has not been kind to Research in Motion stock.  In 2008 RIMM was at $140, in 2009 RIMM fell to $80, in 2010 it fell to $65…where is this stock headed now that the iPhone is available at Verizon?  We might be looking at the final nail in RIMM’s coffin.  Every tech company who tries to thrive as a one trick pony is destined to walk in the footsteps of former one hit wonders like Word Perfect and Palm.  Sometime over the next 18 months they’ll be looking to hire a former Apple employee to make one last stand before they decide to sell the company for $1.2 billion to a floundering mobile competitor like Microsoft or HP.  Yes, we’ve seen this movie before.  RIMM’s stock and its associated $33 billion market cap is prepping for the final plummet.      

Online survey firm uSamp recently published results showing that Verizon Blackberry users can’t wait to switch to the iPhone. 66 per cent of users indicated a probable switch upon availability.  This report comes on the heels of a December research report by ITG showing that Blackberry has already relinquished its spot as Verizon’s top smartphone; one year ago Blackberry accounted for 90% of Verizon smartphone sales, its share is now below 20 per cent because of Google’s Android.  If the uSamp survey can be trusted, it is likely that RIMM will quickly become an irrelevant, single digit market share player.  

As an investor, it can be easier to forecast the losers than it is to forecast the winners.  RIMM’s troubles became apparent back in 2008 when it released its first touch screen smartphone, the BlackBerry Storm, with a buggy operating system that couldn’t get the touch controls quite right.  Similar glitches are anticipated as RIMM prepares to release its version of a 7-inch tablet computer called the Playbook.  How does a company expect to have success against Apple’s iPad when they arrive to the marketplace one year late with an inferior product?  Steve Jobs was correct when he mentioned how difficult it would be to compete with the iPad.  The Playbook has a smaller screen, offers limited battery life, and is supported by an app store that is billions of downloads behind Apple’s App Store success.  If RIMM were smart they would skip the tablet craze altogether and come out with the next big tech hit…but they’re not innovative enough to do it.  For RIMM it was the physical keyboard or bust and now it’s bust.  We’re initiating a 2% allocation of January 2012 $70 puts and will feed the position as it grows.


Disclosure: long AAPL, short RIMM

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