It is no secret that the world of smartphones has consolidated and continues to consolidate.  Research in Motion Ltd. (NASDAQ: RIMM) was the smartphone just a few years ago for executives and workers.  RIM has a serious problem now and it is not just an eroding base.  CEO Thorsten Heins is in total denial.  He told CBC Radio this morning that the company is not in a death-spiral and further noted, “There’s nothing wrong with the company as it exists right now.”

Really?  Heins must be suffering from a serious bout of rectal-cranial convergence.  The dismal RIM earnings report proved that things are more wrong than even the most bearish analysts and investors thought.  Sure, it is understandable that he has to maintain a positive stance.  But still.. Really?  RIM has gambled its future on its new O/S but that has now been delayed into next year and that means that RIM will miss the entire holiday sales.  It also comes at a time where Apple Inc. (NASDAQ: AAPL) has opened up more and more iPhone relationships.

Google Inc. (NASDAQ: GOOG) and its Android O/S has been taking market share as well, even if Microsoft Corporation (NASDAQ: MSFT) and Nokia Corporation (NYSE: NOK) are so far behind in the smartphone race now that we do not even count them in the running.  Back to RIM… RIM is in a death-spiral and not just because we named it as a brand which will die in 2013.

RIM is laying off even more workers now and the company is facing operating losses. Shipments are running worse than expected, sales are down massively, and no one cares about a keyboard any longer.  The company even lost CNBC’s Maria Bartiromo as some of its best free advertising and she is now iPhone user.

Here is an excerpt from the full CBC Radio interview:

“This company is not ignoring the world out there, nor is it in a death spiral,” Heins said… “Yes, it is very, very challenged at the moment — specifically in the U.S. market. The way I would describe it: we’re in the middle of a transition,” he said. “All that is in the making, it’s in the works. This company is in the middle of it and I’m positive we will emerge successfully from that transition.”

RIM is down another 1.4% at $7.40 this morning against a 52-week range of $7.14 to $33.54 and its total market capitalization rate is now under $4 billion.  The company can talk about its $2 billion in cash all it wants because that will erode rapidly if (or when) operating losses continue.

To offer both sides of the story, one firm did manage to find the gumption to upgrade RIM shares on Monday when Hudson Square Partners raised the rating to Buy from Hold.  The upgrade was a valuation of the intellectual property, its substantial network build out, and on the hope that a foreign player would want the company for that combined package.

In all honesty, we would love to see RIM actually manage a turnaround here.  That being said, we said the same thing about Palm.  Also about ‘the other Canadian tech disaster’ which is Nortel.  There is nothing with hope, but the caveat is that hope is awful if it is the primary exit and business strategy.

JON C. OGG

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