Research In Motion - First Step Forward For A Long Time

Mar.30.12 | About: BlackBerry Ltd. (BBRY)

I don't as a rule write on individual shares. However the Research In Motion (RIMM) story has had my attention for some time. I have watched as the company has refused to believe that there was anything wrong with it's business model, to denying that change was needed, to the eventual capitulation over the last 3 months. I am not going to get involved in a detailed analysis of the company. There are good analyses here and here and they are mostly bearish. These 2 articles give insight into the financials and the technical aspects of RIMM.

Having shorted RIMM twice, I initiated a long position recently. It is clear that RIMM has issues with it's technology (it is not competing with Apple or Google Android). It's phones have therefore been loosing market share. None of this is new. I have no idea whether the new phone to be introduced in the Autumn will be better. However if you were giving a seminar on company turnarounds the 3 stages that you would want to see are:

1. An acceptance that there is a problem.
2. Changes to the management structure to remove the underperforming managers.
3. A new strategy from the new management that addresses the companies' problems.

It is my opinion that RIMM has now completed stages 1 and 2, which looked impossible 3 months ago. I was worried that the new CEO Thorsten Heins was a puppet CEO. However the departure of Jim Balsillie from the company puts that problem to rest. Hopefully former joint CEO Mike Lazaridis will also resign from the board. It seems clear to me that Mr Heins has a free hand to do as he sees fit. The earnings call after the results highlighted to me the change in the way that the company is doing business. This is the first positive step that I have seen from the company in the last 2 years.

I am sure that many of you will argue that it is way to early to call a turn in the company share price. It is clear that Mr Heins has not yet decided on a new strategy and he may fail at the most important part of the company turnaround. It is therefore a share that carries considerable downside risks and not for aunts or grannies. However with the companies' cash pile, no debt and positive cashflow, Mr. Heins has some time to decide on the future direction of the company. With book value over $20 per share, it seems like a good time to be involved in this company, despite the fact that I have a bearish medium term view on the market as a whole.

Disclosure: I am long RIMM.