Tag Archives: RIM.TO

BlackBerry Maker RIM is Going Through a Major Transition – Will it Take Them to the Top?

RIM and BlackBerry have been in the media all too often lately and mostly for the wrong reasons.  There has been lots of speculation as to the future of the company, and there is certainly a negative sentiment surrounding the organisation.  Why?  It has a lot to do with them not taking the competition seriously and adapting to the industry’s biggest changes.  But now they’re in the midst of a major transition.  Will it see them rise to the top and prove the media wrong?  It all boils down to “Can they execute?”

Let’s recap.

RIM essentially invented the smartphone and back in 2007 was sitting at the top of the industry.  Then came along Apple with the iPhone, and then there was the Android operating system backed by Google.  These new entrants changed the game by focusing on the consumer market instead of business clientele, and offered features that RIM ignored such as cameras, easy third party integration and better web browsing.  And to top it off, they were generally easier to use and nicer to look at.

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Power Play: Is Research in Motion doomed?

It may seem that the entire world is up in arms with Research in Motion (RIM.TO) and its executives.

What should RIM do in the upcoming months.. any thoughts?

At the moment RIM.TO is trading below the bookvalue. The last retained earnings of $9,917 (in millions) over 520.60 million shares, give the book value of the shares at $19.0459.  However, it is not always necessary that the past earnings will reflect in future earnings as well.

Just today (November 14th), RIM got the backing of hedge-fund manager Leon Cooperman, who believes that the company will comeback from faltering share price and loss in customers. However on the other side of the spectrum, Highfields Capital sold 1.44 million shares of RIM on November 14th.

The company has sufficient cashflows to meet any obligations, it has no debt, $1 billion in cash and it invested almost $2 billion on capital expenditures (purchase of investments, other companies etc) for the 6 months ended August 2011. The market has been punishing the company due to customer loss, but to my understanding, Research in Motion’s BlackBerry devices are immensly popular in non-North American markets, and that is where the company is going to see majority of its revenues for the next little while.

The company has been focusing away from the short-term into the long-term horizon, which is great for the long-term shareholders. If the price drops any further, I would be increasing my steak in the company.

More analysis to follow.

Alpha

RIM’s next play – dividends?

Research in Motion (RIM.TO) has had a tremendous run in the cellphone market with its Blackberry devices. The company was once revolutionary when it came to communication and security of its network, however the competition is heating up for RIM, especially with the recent acquisition of Google Inc. (GOOG) acquisition of Motorolla (manufacturer of “cool” handsets). Now Google has officially entered the ring of cell phones, and RIM is going to face an uphill battle worse than before as the company is going to have to fight off both Google AND Apple Inc. (APPL). Before Motorollas acquisition, Google was only selling its software on the different cell phones, now it will control the handset and the software, which makes it a stiff competition, especially in the emerging markets, where RIM needs to push to get more subscribers.

So what is the next play for RIM? Should it issue dividends? RIM has reached maturity, and finding it difficult to grow and compete. Unless, the company finds valuable investments, then it will be better off for the shareholders to receive some cash, especially since the stock has decreased by more than 50% within the last year ($26.28), a tremendous blow for a stock that traded at $148 in 2008. The company has yet to come up with marketable phones, and it is lagging behind in innovation. The only thing that is keeping its subscriber base is, well, BBM. I said it. This is the only value-added service for RIM customers. Wait when Google lets its users use a BBM-like software, then the demise will be complete.

The company is sitting on 7.448 billion of current assets,  as of Feb 26, 2011, and 1.791 billion of cash. You may find that it is a lot of cash, however for tech companies it is vital to have this much cushion available for acquistions (if they do come their way). If the company pays out dividend, then it will be eroding its power for acquisitions and future growth, and the company’s stock will nose dive.

Instead the company should focus not on the short-term, but the long-term return on investment. The company should increase its funding in research and development for cutting edge technology. It should consider strengthening its bonds with another software giant (a good candidate will be Microsoft) to fight off the threat of Andriod and IPhone. I expect that the merger of the two companies would be a disaster, as it is with most companies that are acquired by Microsoft, it is just how it is. RIM needs leverage, and it must get it through strategic partnership, and no one would be a better partner than Microsoft, who is also suffering due to Apple’s and Google’s success.

 

I can write more about the topic, however its time to sleep.

 

Alpha