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Research In Motion Ltd (BBRY): This High Value Investment Is Worth The Wait

Android Sales

Google Inc (NASDAQ:GOOG)’s Android is going strong, but its largest manufacturer has run into some trouble. Samsung valuations are down almost 5% since the company released its June quarter results. The street was expecting Samsung to post earnings of 10 trillion-won but it managed only 9.5 trillion-won. The company reported 74 million smartphone shipments, as opposed to expectations of 76 million. The S4 managed much lower shipments than the company hoped. It faced competition not only from other Android devices but also Samsung’s own S4 mini; mini has lower margins. More than anything, the slide is due to market paranoia that giant such as Samsung are also being affected by cheaper alternatives, are forced to roll out cheaper versions of their flagship phones and compromise on margins. Going forward the street should expect margins to slip in the smartphone industry, but that should not have an impact on Android.

Way Forward

This quarter suggests that comeback in the smartphone industry will not as easy as Research In Motion Ltd (NASDAQ:BBRY) investors hoped. While the BB10 devices have excellent hardware and some exciting features, the competition is also coming up with new hardware and devices. Samsung’s Android loaded S4 has attracted a lot of consumer attraction and is currently the highlight of the smartphone sector. The company has also launched a mini version of its S4 devices. The shares of Samsung have declined, primarily due to missing high market expectations. If Research In Motion Ltd (NASDAQ:BBRY) plans to compete with Samsung, Nokia and Sony in the emerging markets it will have to compete on price and hardware capability.

The only way forward is to lower its margins and focus on building itself as a high margin service based company. Offering different packages of its BlackBerry services in the emerging markets will be a step in the right direction. The company is also willing to license its BB10, but it’s too soon to tell if leading manufacturers will be willing to move away from Android.

Bottom-line

The current quarter was a serious setback from Research In Motion Ltd (NASDAQ:BBRY), but the company is still in the competition. Despite missing analyst expectations, BlackBerry’s financial health is still pretty good. The biggest concerns are the shrinking of subscriber base and low BB10 unit shipments. The company has made the right strategic move by focusing on low/medium-end markets but is going the wrong way about it. It should be focusing on competing on price and hardware capability. The main order of business should be stemming the flow of its subscriber base deterioration. Current investors should hold on while new investors should avoid Research In Motion Ltd (NASDAQ:BBRY) shares until BB10 gains some traction.

Mohsin Saeed has no position in any stocks mentioned. The Motley Fool recommends Google Inc (NASDAQ:GOOG). The Motley Fool owns shares of Google Inc (NASDAQ:GOOG).

The article This High Value Investment Is Worth The Wait originally appeared on Fool.com.

Mohsin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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