Apple Inc (AAPL), Google Inc (GOOG), Facebook Inc (FB): RIM is Late to the Party Again

Apple Inc (NASDAQ:AAPL) is getting back in the music game after shutting down its iTunes integrated music listening platform, Ping, last month. The company’s music platform, iTunes, currently only offers the option to purchase music outright. Yet, Apple Inc (NASDAQ:AAPL) is now looking for a way of offering streaming music services. This service could make the iTunes mobile app a powerful offering for the iPhone. Such a service would rival the start-up, Spotify, which is considered the leader in the music listening app and platform sector.

Should this Concern Apple Inc. (AAPL) and Google Inc (GOOG)?

Of particular interest to Apple Inc (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) investors, Research In Motion Limited (NASDAQ:RIMM) recently announced plans to add a reinvigorated music service for its Blackberry 10 devices. The app will be developed by 7Digital, and offers Blackberry users over 22 million soundtracks. This new music store will have further integration with social media and recommendation capabilities. However, the company appears to continue to be a laggard in the industry, as a number of other companies besides Apple Inc (NASDAQ:AAPL) have already announced plans for a music service. As the app developer support has been weak for Blackberry, this new service should at least give current Blackberry users something to get excited about, yet the company’s problem is that its user base is still in rapid decline.

Microsoft Corporation (NASDAQ:MSFT) also made an announcement earlier this month that it was moving into the music industry by offering music services integrated into its Windows 8 devices, including mobile phone, and Xbox gaming consoles. Around the same time, Facebook Inc (NASDAQ:FB) announced plans to integrate music directly onto its site. We believe there is a proven market for social listening, although Apple Inc (NASDAQ:AAPL) was not able to capitalize as evidenced by Ping. Facebook Inc (NASDAQ:FB) has one of the best opportunities to finally perfect this segment. Given that music streaming sites have had greater success with mobile monetization, a streaming music service by Facebook Inc (NASDAQ:FB) that ties into its mobile app might give the company a jumpstart in mobile monetization.

Google Inc (NASDAQ:GOOG) has had its music platform in the market for over a year, but has failed to gain real traction. After a dismal quarter for earnings, the company is looking to better utilize its leading market share in the mobile operating sector. This includes building a more robust music offering. The company recently announced a huge deal with Warner Music Group.

Despite their various attempts, RIMM cannot seem to get ahead of the competition. We see Apple Inc (NASDAQ:AAPL)’s initiatives to launch a streaming service as a another blow to RIMM’s already flaying business. As Apple already has a vast user base, the company could evidentially be a threat to Facebook’s potential social listening platform. The downfall to Microsoft’s planned music offering is its limit to Microsoft devices. Of course, Google Inc (NASDAQ:GOOG) has a leg up given the fact it owns over 50% of the mobile operating system market share with Android, but we believe that the company’s Google Music service has been in the market for so long that it’s difficult for any sort of reinvention.

RIMM did manage to grow its subscriber base for last quarter by 2 million to a total of 80 million thanks to emerging markets. Yet, with these new customers comes a lower average revenue per user. RIMM is expected to continue to lose North American market share as next quarter results include the intro of Apple Inc (NASDAQ:AAPL)’s iPhone 5. As a result, performance going forward will be driven by emerging markets, which carries a much lower revenue per user, causing margin compression.

When considering which company to buy, it does go beyond just which music service is the best. Although Facebook Inc (NASDAQ:FB) might get some good traction and see more time spent on its site by users, this does not necessarily translate into revenue. As a result, we would like to see Facebook develop some growth drivers that will help the company grow over the longer-term, as the company currently trades at 200x earnings. There are obvious concerns as to whether it can grow into this valuation.

RIMM trades well below some of its top mobile phone competitors on a multiples basis, although both its trailing and forward P/E ratios are incalculable given negative earnings are in play. We remain cautious on the company given its continued decline in the mobile market, and see a takeover as the only hope for positive stock performance in the interim. Despite this, S&P recently upped its RIMM price target from $7.50 to $9.00, where the company currently trades around $7.50. As well, Wells Fargo increased its estimates for revenue from $9.57 billion to $11.16 billion in fiscal year 2013.

Meanwhile, Apple, Google Inc (NASDAQ:GOOG) and Microsoft trade in a much more reasonable P/E range between 14x and 21x earnings. We believe that Apple has some of the best growth prospects of all the companies and trades the cheapest at 14x earnings. Apple Inc (NASDAQ:AAPL) also has the highest fund interest of the five companies, with over 40 funds with at least 5% of their 2Q 13F portfolios invested in the company; see all funds owning Apple. The expected five year EPS growth is another positive vote for Apple at a 21% CAGR, compared to Google’s 16% and Microsoft’s 10%.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!