Apple Inc.
Apple Inc. designs, manufactures, and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers. Its famous products are Ipod, Ipod Touch, Macbook, Iphone and Ipad.
Research in Motion (RIM)
Research In Motion Limited (RIM) designs, manufactures, and markets wireless solutions for the worldwide mobile communications market. The Company provides platforms and solutions for access to email, phone, SMS messaging, Internet, and Intranet-based applications. Its famous products are Blackberry wireless handheld devices such as Blackberry Bold, Blackberry Curve and recently Blackberry Torch.
Stock Performance
Chart 1. This is the stock prices of Apple Inc. over a period of one year. Apple is trading almost at its all time high.
Chart 2. This is a stock price of RIM for a period of one year. RIM is trading at its 52 weeks lows.
Fundamentals
Apple is currently trading at 18.29 times P/E. which is significantly higher than RIM which is currently trading at 10.44 tims P/E. Both companies have good cashflows and debt management. The net profit margin both Apple and RIM are 20.72% (Q2, 2010) and 18.15%(Q2, 2010) respectively.
Question 1 : Why does RIM (Blackberry) underperforms?
The main reasons for such as huge discrepancy in the stock performance are mainly attributed to the wireless handheld devices and its Operating System (OS). RIM still held the biggest market share of smartphone with Blackberry OS, Android ranked second followed by Apple OS. However, with Blackberry's OS slow in catching up with the general market, it fails to attract non-corporate users while Android and Apple are happily swallowing users from any segment of the market enabling them to have such a tremendous growth. With Steve Jobs back in Apple, Apple has transformed itself into the most innovative technology company. While Michael Lazaridis from RIM who invented the Blackberry phones used to be praised for his understanding of corporate needs such as convenient wireless access to emails and messages and most importantly, confidentiality. That legacy would not hold long anymore,RIM is suffering pullbacks in countries like Saudi Arabia, U.A.E and India for its heavily encrypted data which could potentially be used as a source of communication for terrorist. RIM is still working out its deal with governments to solve those problems, but it would ultimately need to either let the government access their enterprise server or set up a data center in every country that requires access to its data. The question comes, even if you're not dealing with the terrorist, drugs or sex trafficking, would you want the government to have access to every single message or emails that you send?
Question 2 : Is this an opportunity or a trap?
For value investor, it is always an opportunity to invest in a company when it's stock prices is at a heavy discount such as RIM. Recently, RIM announced a share repurchase program, RIM is trying to convince the market that the company still have faith in its own product and future growth. The last time RIM made its stock repurchase in 2003, two years after that the stock went up an amazing >300%. Will the stock repeat that history this time?
Apple is currently trading at 18.29 times P/E. which is significantly higher than RIM which is currently trading at 10.44 tims P/E. Both companies have good cashflows and debt management. The net profit margin both Apple and RIM are 20.72% (Q2, 2010) and 18.15%(Q2, 2010) respectively.
Question 1 : Why does RIM (Blackberry) underperforms?
The main reasons for such as huge discrepancy in the stock performance are mainly attributed to the wireless handheld devices and its Operating System (OS). RIM still held the biggest market share of smartphone with Blackberry OS, Android ranked second followed by Apple OS. However, with Blackberry's OS slow in catching up with the general market, it fails to attract non-corporate users while Android and Apple are happily swallowing users from any segment of the market enabling them to have such a tremendous growth. With Steve Jobs back in Apple, Apple has transformed itself into the most innovative technology company. While Michael Lazaridis from RIM who invented the Blackberry phones used to be praised for his understanding of corporate needs such as convenient wireless access to emails and messages and most importantly, confidentiality. That legacy would not hold long anymore,RIM is suffering pullbacks in countries like Saudi Arabia, U.A.E and India for its heavily encrypted data which could potentially be used as a source of communication for terrorist. RIM is still working out its deal with governments to solve those problems, but it would ultimately need to either let the government access their enterprise server or set up a data center in every country that requires access to its data. The question comes, even if you're not dealing with the terrorist, drugs or sex trafficking, would you want the government to have access to every single message or emails that you send?
Question 2 : Is this an opportunity or a trap?
For value investor, it is always an opportunity to invest in a company when it's stock prices is at a heavy discount such as RIM. Recently, RIM announced a share repurchase program, RIM is trying to convince the market that the company still have faith in its own product and future growth. The last time RIM made its stock repurchase in 2003, two years after that the stock went up an amazing >300%. Will the stock repeat that history this time?
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