24/7 Wall Street has put together a list of companies it thinks will disappear in 2013 and RIM and MetroPCS made the top 10. Their criteria is largely generic – things like a loss in sales, public data, etc, but these are two companies that are still very much in the mix in the every day lives of a lot of us so it’ll be interesting to see if they got this one right or if RIM can rebound.
4. Research In Motion
RIM once owned the smartphone market. Its BlackBerry products were used largely by businesses. It is hardly worth repeating the story of how RIM was late to the consumer market, where it has been pounded relentlessly by Apple and an army of Google Android phones from manufacturers as diverse as Taiwan’s HTC, South Korea’s Samsung and Motorola in the U.S. The pace at which the company fell apart once the process began was even more extraordinary than its rise. Revenue and net income jumped from $6 billion and $1.3 billion, respectively, in fiscal 2008 to $20 billion and $3.4 billion in fiscal 2011. In just the past year, however, the company has warned twice that it would miss its earnings forecast, replaced its long-time CEO, warned a third time about its first-quarter loss, and disclosed plans for layoffs of thousands of employees. The company’s board said it was reviewing “strategic options,” which would include a sale. The best measurement of the swiftness of RIM’s fall is the change of its share of the U.S. smartphone market. Research group NPD recently reported that RIM’s U.S. market share was 44% in 2009 but only 10% last year. Data from research group Comscore shows that share has fallen further this year. The net effect on RIM’s stock price has been devastating, taking it down from $144 four years ago to $11 recently. RIM cannot survive as a standalone operation in the face of these trends. The Wall Street Journal recently reported “outright buyers could include Asian handset makers like HTC Corp or online retailer Amazon.com Inc. which has jumped into the tablet business.”
This tiny carrier has lost any chance it may have had to compete with larger competitors T-Mobile, AT&T (NYSE: T), Verizon (NYSE: VZ) and Sprint-Nextel (NYSE: S). Investors have abandoned the company, depressing its shares from a 52-week high of $17.84 to $5.86 — very near its period low. Competition with the larger companies has begun to take a significant toll. The Associated Press recently reported that, “MetroPCS Communications Inc. says it gained a net 131,654 subscribers in the quarter, the worst result in years for the first quarter, which is normally the company’s strongest. It ended the quarter with 9.5 million customers.” The carrier’s first-quarter earnings were so weak that a number of securities analysts downgraded its shares. MetroPCS often is mentioned as a takeover target. In May, several Wall St. analysts said that the company was in buyout talks with T-Mobile, which is owned by giant European telecommunication company Deutsche Telekom. This immediately gave MetroPCS (NYSE: PCS) stock a push higher. Later in the same month, MetroPCS shares rose again as the CEO of Sprint-Nextel said he expects consolidation in the cellular carrier market. Sprint and T-Mobile both continue to struggle because of their modest subscriber bases compared to AT&T and Verizon. Each needs more customers. While MetroPCS is too small to survive on its own, its buyout would give either company the additional customer critical mass it needs.