The competition between Apple and RIM appears to be taking on Ali-Frazier status, even though both companies are taking another beating, as it were, in trading today.
Apple is down 3.33%, and RIM is down 2.4% at 3:40 EST - both victims of an overall market decline that once again can be attributed to deep disillusionment over the health of the overall economy. No major economic number came out today, although the White House meeting between President Bush and President-elect Barack Obama made news all over the world. That said, it wasn't a surprise and no big economic announcement came out of it.
I did see Harvard Professor Thomas Frankel on Bloomberg news today - he's one of those guys who figure out when the U.S. economy is in a recession - and his prognosis can be summed up in one word he (almost comically) kept using over and over again after being badgered by the Bloomberg interviewer.
That's the sentiment on Wall Street today with Apple and RIM losing value, even though both can justifiably maintain their core business strategies are in good shape. Today's Tech Ticker affirms that while both companies are vulnerable to a consumer slowdown, "relatively speaking, Steve Jobs & Co. are holding up much better than its rivals, notably Research In Motion."
Why? Because of the continuing success of Apple's G3 iPhone - the best-selling phone in the U.S. during the third quarter.
"I have never seen a product adapted so fast," Apple shareholder Howard Lindzon of Knight's Bridge Capital told Tech Ticker. "They are the best retailer on the planet." By contrast, Research In Motion is "running around, chasing Apple," Lindzon says. RIM is "not going to win that war."
While Apple has one phone, which is selling like hotcakes in a tough market, RIM is "fighting battles on many fronts," says the blogger and VC investor. "Apple is much better positioned than RIM."
Even so, with RIM trading below $47 today, Research in Motion still looks like a good value. Yes, it was selling at $133 just last August. And yes, it was also trading at 40 times trailing earnings. But now it's trading at a much more manageable 15.3 times trailing earnings, with earnings growth estimated to rise 30%. Says Ben McClure, director of McClure & Co., an independent research consultancy, on Investopedia.com today;
"Research in Motion's enterprise value is about $27 billion and by my calculations the company will generate about $1.4 billion of free cash flow this year. Trading at about 20 times free cash flow, I'd say the stock is approaching a floor."
McClure points out that RIM has only a minute portion of the global cell phone market, leaving it lots of room to grow, and that new Blackberry models like Bold and Thunder should keep consumer interest high. "They should boost Wall Street confidence in estimates for the third quarter ending in November and the fourth quarter ending in February," says McClure.
Interestingly, McClure sees RIM as a potential takeover target for cash-rich companies like Microsoft, Dell, and Hewlett-Packard. As he says, "it's not every day that a top-tier technology company can be snapped up at such a low price."