Mobile Weekly Notes: Apple and RIM

Apple’s (NASDAQ:AAPL) shares saw a nice run-up of around 11% this past week after its announcement that pre-orders of the iPhone 4S had topped one million in a single day and totaled over 4 million in the first weekend. ^[1] Markets are also anticipating another round of good results this quarter on back of improved iPad and MacBook sales. On the other hand, we have Research in Motion (NASDAQ:RIMM) which faced arguably the worst BlackBerry service outage in its history due to a “core switching failure” that stranded millions of subscribers across Europe, the Middle East, Africa, India and the U.S. without basic email, browsing and messaging services on their smartphones. ((BlackBerry problems hit four continents, Reuters, Oct 11th, 2011)) RIM was further hit by claims by activist shareholder Jaguar Financial Corp that it had garnered the support of nearly 8% of the company’s shareholders in a bid to force the BlackBerry maker to sell itself, seek a merger partner or split itself into a number of companies.

Here are some of the key updates from last week on these names.

Apple

Initial reviews of the iPhone 4S weren’t all that great as analysts were hoping for a newly redesigned iPhone 5 but the record number of pre-orders that Apple has managed to generate shows that the 4S has enough exciting features to keep the customers interested. However, a point to note is that Apple has expanded the list of carriers that sell the iPhone to include Verizon (NYSE:VZ) and Sprint (NYSE:S) in addition to AT&T, which originally was the only carrier that sold the iPhone 4. Also, Australia and Canada have been added to the list of launch countries that receive the first iPhone 4S batch. Keeping these in mind, it would be tough to say if customer demand for the iPhone 4S has truly exceeded iPhone 4’s. The picture will be a lot clearer as more sales data comes in over the coming weeks.

This week, Apple will announce its first Q4 results after Steve Jobs’ death and everyone is expecting a strong quarter yet again. All eyes will be on the new CEO, Tim Cook, as markets will look for signs of weakness post-Jobs. It is imperative for Cook to come out with a strong road-map for the future, else Apple could take a short term hit in the markets.

See iPhone 4S Pre-Orders Put $500 Stock Price in Sight and Apple Earnings Preview: What We’re Watching Post-Jobs.

See our company analysis

RIM

RIM’s situation with the BlackBerry outage is worrisome as the impact seems to have been the worst in Europe and the emerging markets, which in particular, remain their last bastion of hope that hasn’t been dominated by Apple and Google (NASDAQ:GOOG). The BlackBerry Messenging (BBM) service, which has been a unique selling point for the company’s flagship product, was also affected in the outage and the company will now increasingly find it tough to hang on to its 46 million active subscribers of the BBM service, as alternatives such as Apple’s iMessage emerge.

Further, calls for a management shake-up or stake sale grew louder as Jaguar Financial Corp. said it has the backing of around 8% of  the company’s investors supporting it in its campaign. While we believe that if successful, a stake sale could unlock value, any acquirer that wants to keep the handset business will have a mammoth challenge in turning around its core business in the face of intense competition from Google (after the Motorola Mobility (NYSE:MMI) acquisition) and Apple.

See RIM’s BlackBerry Service Disruptions a Blow to its Turnaround

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Understand How a Company’s Products Impact its Stock Price at Trefis

1. iPhone 4S Pre-Orders Top One Million in First 24 Hours, Apple Press Info, October 10th, 2011 [↩]