Another year and another formerly high flying company finds itself flying a lot lower.
You may not have heard of Canada’s Research In Motion or RIM, but there’s a possibility you’ve heard of its BlackBerry smart phone.
Launched in 1999, BlackBerry grew to have nearly 80 million users worldwide and was often the preferred phone of business and government due to its strong security service.
It was dominating the smart phone market as it continually beat the sales, quarter on quarter, year on year.
But as its dominance grew, so did its risk and this is the reason risk is often a misunderstood concept when it comes to investing.
Often the riskiest investments are those that give the impression of no risk at all because of stellar performance and their current ‘top of the heap’ status.
RIM was flying, but its competitors, primarily Apple with the iPhone and Google with Android, were beginning to take off.
RIM’s innovations failed to keep pace with its competitors due to continuing delays, while late last year its security service that encrypts data had major outages around the world.
This caused huge frustration for users just as Apple upgraded its operating system.
The real evidence in RIM’s decline is shown by its share price, from a peak of $144 in 2008 when it looked indestructible, crumbling to less than $7 in recent weeks.
With 2.25 billion in cash and a new BlackBerry scheduled to be released in 2013, RIM isn’t quite dead yet, but its workforce will be slashed heavily – something that will impact its HQ in Waterloo, Ontario.
8000 high wage RIM employees are based in Waterloo, which also underlines the frailty of real estate investment in a town where one company is a major employer.
And did anyone see RIM’s fall from grace coming?
Back in 2008, out of the 33 analysts covering RIM’s shares, 27 rated it a buy, five rated it a hold and none rated it a sell!
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re the best financial adviser in Australia.
