No, this isn't meant to be a bullish article. I am just trying to put Research In Motion (NASDAQ: RIMM) (Cramer's Take) in perspective because I think that people will confuse the greatness of the mobile Internet theme with the hazards of investing in the BlackBerry maker.
First, you have to ask yourself, what really went wrong with RIMM? Was it demand? No, demand was strong. They actually guided to the upper end of units. The issue was average selling price because it has gotten more competitive out there.
That's where people went wrong -- average selling price. I think the main theme behind the tsunami -- parts cycles, equipment cycles, backhaul needs, tower demands -- are more on then ever. I do believe that the competitive landscape among the providers is going to get hotter and hotter, which make predicting the worth of RIMM harder. But the darned thing is selling at 14 times earnings in the low $70s, and that's not all that rich. I would rather sell Nokia (NYSE: NOK) (Cramer's Take) than RIMM.
Of course, as usual, I would rather buy Apple (NASDAQ: AAPL) (Cramer's Take), which has been my pick all along.
You know Friday they are going to throw these stocks -- all of them -- away at the opening. But as it dawns on people that it was average selling price and not demand, the buyers will come back. Probably sooner rather than later.
Not only that, but I will go a step further. I believe that Verizon (NYSE: VZ) (Cramer's Take), which is attuned to what the customer wants, will embrace the Palm (NASDAQ: PALM) (Cramer's Take) Pre and support it, perhaps even aggressively.
I know that's on the other side of what Scott Moritz, a tech reporter at TheStreet.com, wrote, but I do not think that Verizon can afford not to offer this phone given the demand it has engendered already from Sprint (NYSE: S) (Cramer's Take), a vastly inferior character.
I would, at the coming discount, be a buyer of Palm too, betting that we will soon see Verizon support it for 2010.
Everyone's quick to write off this thesis after the player that has now missed twice in a row.
Maybe the fault is with the player, not the thesis.
And maybe that's in the stock of the player when it is below $70 a share.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
9-26-2009 @ 7:57AM
ebrandler34 said...
AAPL has had a tremendous run, and I don't disagree with your central theory on mobile internet .... but they can't ALL be winners. AAPL, RIMM, NOK, PALM, et. al. cannot all break out in the long term. Half of them will win, and half will lose ... over time.
The next challenge will come in Spring/Summer 2010, because everyone (even AAPL) will have to cut prices to keep ahead of the jubilant market participants who now expect a prompt return to 2006-2007 profitability.
AAPL runs a premium brand name, but I don't think RIMM is in their league. The market seems to be rejecting RIMM above $85 per share (see 06/11/09, 09/23/09).
9-25-2009 @ 1:00PM
e.krabs said...
This is very thought-provoking. Thank you for sharing these thoughts.
I agree about RIMM and its near-future prospects. However, I am also bearish on AAPL and Palm at this point. No doubt, the iPhone is a great story, and I've been extremely bullish on it for a while. And yes, I also agree that its balance sheet shines like its products. But at this point, I don't see any clear upsides that will drive the business foward. Not yet anyway. Plus, the iPhone is only one-third of the Apple story, and I don't currently see any tradable upsides to the other two-thirds either.
The Palm Pre, from what I've seen anyway, has had mixed reviews. Actually, the ones I've seen on tech enthusiast sites are largely negative. I just don't think the Pre has what it takes to compete against the iPhone or even Blackberry. I see no technical advantage, and yet, this is Palm's do-or-die bet. I hate saying that because I was a longtime Palm fan, but if there is no obvious advantage to the Pre, then I fail to see how it's going to gain enough traction that would make it compelling enough for other service carriers to pick up.
It's not that I am bearish of the entire smartphone space, but it's hard to go in long when there are no apparent upsides that I can personally see anyway. Certainly though, if I HAD to choose one, it would be AAPL.