News of the big drop in RIM’s profits has many people predicting that RIM will suffer the same fate as Nortel. It’s understandable that Canadians are concerned about the future of a Canadian high-tech success story like RIM after they watched in disbelief as Nortel failed. However, there is a big difference between RIM’s financial results and Nortel’s.
In the past three quarters, RIM’s profits have been $934 million, $695 million, and $329 million. This is a disappointing trend, but keep in mind that they still have profits. Nortel had massive losses over the course of a decade before they finally speared in. There is a big difference between lower profit and negative profit.
To draw an analogy with retirement saving, consider Rick who has added the following amounts to his RRSP over the last three quarters: $9340, $6950, and $3290. By contrast, in 2001 Nora withdrew $257,200! Rick has reason to be concerned about his trend, but Nora is speeding towards a brick wall.
I have no idea what will happen to RIM’s business in the future, but there are no similarities between their finances and Nortel’s finances yet.