Thursday, December 27, 2012

As Apple shares slide, Research in Motion rises - Washington Post

The answer may surprise you. Apple’s stock, which peaked at more than $700 per share in September, has lost nearly 25 percent of its value. But Research in Motion, due to report earnings Thursday afternoon, has seen its stock more than double its abysmal September price of $6.30 per share. On Thursday morning, the stock was trading at $13.63 a share.

It’s a strange role reversal for the companies, which compete heavily in the smartphone market but have been on opposite trajectories for the past three years. Since Apple’s iPhone passed the BlackBerry in U.S. market share two years ago, the Cupertino, Calif., firm has become in the dominant player in the smartphone market. RIM fell hard on complaints that it wasn’t innovating quickly enough.

Now RIM is the underdog, scrabbling for a foothold in the market, while Apple is the tech titan fighting worries about its ability to innovate quickly enough.

Analysts have scrambled to pinpoint a reason for Apple’s declining share prices, citing everything from a stock market correction to supply constraints to concerns that Apple’s pace of innovation may be flagging. The company’s bug-ridden launch of its mapping program, and its resulting executive reshuffle, raised some doubts about the company, even among its most loyal fans.

The “fiscal cliff” negotiations are also hanging over Apple’s shareholders â€" namely rules that would increase the capital gains tax, said Motley Fool analyst Andrew Tonner. Some lawmakers have proposed raising the capital gains taxes to 20 percent from 15 percent, which could spur longtime investors to sell now and avoid a bigger tax bill.

“Apple’s run over the past five or 10 years has been so tremendous that you have a lot of people who have been long-term holders on this stock,” said Tonner, who holds Apple stock. “Investors could be looking at themselves and saying,‘Apple had a great run, but maybe I want to get out now at a lower rate of taxation.’ ”

But those decisions could also show that investors aren’t sure Apple has much higher to go, said Colin Gillis, a technology analyst for BGC partners. The company is locked in a smartphone battle with Google’s Android operating system, which has eclipsed Apple’s iOS in the global market. And so many people have iPhones that the company may be nearing a saturation point.

“Even with the capital gains tax, if you thought it had a lot of legs in it, you’d probably want to hold onto it,” Gillis said. “But how many more doubles does it have in it?”

Meanwhile, RIM is enjoying something that has become scarce since it lost its hold in the U.S. smartphone market â€" hope. Under new leadership, the company posted a surprising subscriber gain last quarter and has excited investors with its plans to launch a slick, high-end smartphone operating system next month. New handsets, they hope, will help RIM regain its status a major player in the smartphone market dominated by Apple and Google, which have roughly 95 percent of the U.S. market between them, according to recent data from consumer research firm Kantar Worldpanel.

Analysts have more tempered expectations. The company is expected to report weak sales and profits for the third quarter, but analysts are more focused on what RIM will say about the future.

The company will have to deliver on its promises; fight aggressively to maintain strength in the business and low-end smartphone markets around the world while its smartphone business finds its legs; and, above all, run lean.

“I don’t see RIM being out of business in a year,” Gillis said. “But they may need to live on a much smaller expense base and volume of handsets shipped.”

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