Tim Horton’s is a Canadian casual restaurant best known for coffee and doughnuts. The first location opened in Ontario in 1964, and by 2006 the chain had 3000 locations open. This year the company’s stock rallied 20%…giving it a market value of around C$7.8 billion. And with that Tim Horton’s surpassed BlackBerry maker Research in Motion in market cap.
RIM’s market value has plunged to something like C$7.2 billion…a far cry from the C$84.5 billion the company was worth in 2008. Back then RIM beat out Royal Bank of Canada as the country’s most valuable company. Today it stands at 58th on the S&P/TSX Composite Index, and shares have fallen to levels last seen in 2003.
And last week the company announced that net income fell 71% in the third quarter. But it isn’t just the disappointing quarter that is a problem…it’s also the disappointing guidance. RIM expects future revenue to decline. The company shipped 14.1 million smartphones in the third quarter, and expects to ship between 11 and 12 million this quarter. And the release of the first phone running on the BlackBerry 10 operating system will be delayed until late 2012. What is really telling is that the company is taking a $485 million write-down for excess inventory after flopping its entry into the tablet market with the Playbook.
The outlook is further clouded by an accelerating loss of market-share to the competition. RIM’s U.S. market share has dropped to 9.2%…a year ago it was 24%.
The real question mark is RIM’s ability to recover. It may simply be too late for a real turnaround because “the history of tech turnarounds, when companies get themselves into this kind of trouble, is very thin”, according to CNBC.
Putting all conjecture aside, RIM’s stock is a sell. Shares are down 77% so far this year, and the stock is in a clear downward trend and signaled a long-term sell since this past spring. If I had to choose between coffee and doughnuts and holding this stock, I would look for the nearest Tim Horton’s.