Digital Equipment Corp and Wang Labs were both highly successful companies in the era of microcomputers. However, both completely missed the transition to PCs. Maybe in internet time that was centuries ago, but in real time it was only 30 years ago. What has taken Wall Street so long to figure out that Research in Motion is the today’s Wang?
The following statement in Morgan Stanley Internet Report from January 2010 kind of beats around the bush, but doesn’t make any proclamations: New companies often win big in new cycles while incumbents often falter.
In my opinion, Nokia, Palm, Microsoft and RIMM have all faltered in the transition to mobile computing.
My disappointment with RIMM goes back to 2009 when it became apparent that the company couldn’t deliver the phone that I wanted. In 2007, my golf partner showed me all of the cool stuff that he could do with his iPhone. I waited for RIMM’s response. The Storm came out the following year. The Verizon sales rep begged me not to buy the phone – not wanting me to be added to growing list of disappointed owners. The Storm II released in 2009 wasn’t be much better.
At that point, my love affair with RIMM as a company was over. I had patiently given them two years to develop a credible alternative and they failed. My love affair with the stock would end shortly after that when I was caught on the wrong side of an earnings disappointment.
After four years of floundering, Wall Street has finally run out of patience. A barrage of downgrades were issued after RIMM’s latest earnings announcement (RIM Off 11%: Four Downgrades On ‘Transitionary’ Quarter). In spite of all of this there are individual investors still adamantly defending their position in the stock. On Saturday, the discussion was spirited on StockTwits. I added my two cents with the the following:
I have learned over the years not to knock anyone’s investment strategy. There are a million ways to skin a cat in this business. However, I can only imagine that those continuing to support RIMM are part-time investors with additional sources of income. In my world, it is poor money management to have my money tied-up in a stock like RIMM. Last year the stock had a negative 14% return. Not only was the 14% lost, but the opportunity to invest those dollars in a leading stock was lost as well.
Disclosure: Long Apple.