Deathwatch: RIM's Evaporation Trail Could Hit Zero by Early-2013 (RIMM, AAPL, GOOG, HPQ)

The new data from comScore on US carrier networks for smartphones is beyond alarming.  It is not just confirming a trend, but confirming that there is no sign of a negative trend easing up.  We knew about Research-in-Motion Ltd. (NASDAQ: RIMM) losing market share.  While it has been confirmed that Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG) are winning, the drop off in market share actually feels worse than what RIM has recently offered by our count for guidance.

The data from more than 30,000 smartphone users in comScore’s data showed that Samsung is the current top handset manufacturer overall with 24.8% market share and Google’s Android led the smartphone platforms with 38.1% market share. Also noted after Samsung, “followed by LG with 21.1 percent share and Motorola with 15.1 percent share. Apple strengthened its position at #4 with 8.7 percent share of mobile subscribers (up 1.2 percentage points), while RIM rounded out the top five with 8.1 percent share.”

When you look at the February to May 2011 data the results are mostly some of what we already knew… RIM’s share of mobile subscribers fell to 8.1% from 8.6%, while Apple’s share grew to 8.7% from 7.5%.  Google’s Android position grew to 38.1% from 33.0% in the prior three-month period.  Where this gets awful is that RIM’s position in smartphones went from 28.9% to 24.7%.

Here is the astonishing figure: 76.8 million people in the U.S. owned smartphones during the three months ending in May 2011, up 11% from the preceding three-month period.  Now carriers have the warlords set, and the question is which warlords get to survive.

There is only one conclusion.  We all knew about RIM’s overall decline and comScore broke out for us just how bad this has been for the company.  If you invest in stocks you have already seen this.  What this comScore data does not tell you is that RIMs position is even worse.  If you look at its most recent guidance and just how bad it is, the only conclusion is that RIM could ultimately find itself up a certain named creek without a paddle.

The market share loss is only continuing and now we have yet to find a single soul who can honestly make the case that this is transitory or that it will turn around.  Hewlett-Packard Co. (NYSE: HPQ) now owns Palm and everyone considers Palm to be a pioneer in the world of smartphones.  Sadly, Palm’s market share from February to May dropped from 2.8% to 2.4%.  In short, that is a race to ZERO in seven quarters at that pace.

RIM was also a smartphone pioneer just like Palm.  If you look at the RIM drop from 28.9% to 24.7% in smartphone market share, that also is a race to ZERO that is only seven more quarters.  Surely the larger market share will keep RIM off the same desolate plan, but this paints a very bleak picture when you consider that the most recent warning on sell-through rates and deliveries combined came to much worse guidance than expected.

Our take is rather simple.  RIM has less than a year to get its act together to come out with an iPhone-killer or Android-killer.  The current management team does not seem to be up to the task.  The good news is that it has now been proven that consumers will not treat what is hot one year as hot automatically in the years ahead.  RIM needs to make sure that its future could offer the same upside that its competitors took away from it before.  Having a seven-quarter trajectory to zero market share is nothing short of nerve-rattling.  It is also far worse than even that earlier bleak picture that RIM’s management laid out just last month.

If you want to know why the value on RIM looks so cheap on P/E basis, now you have yet one more reason as to know why…  It is a value trap.

JON C. OGG