Let The Research In Motion Sweepstakes Begin

Apr.26.12 | About: BlackBerry Ltd. (BBRY)

Research In Motion (RIMM) has been in a slow and steady decline for the last year. The company has been losing market share quicker than Instagram said yes to a $1 billion buyout offer. It may have created the "smartphone" years ago, but failed to adapt to a changing marketplace. Research in Motion left an opening for Apple (NASDAQ:AAPL) to slide into the market, and it has been downhill from there. Since then, Apple and Google have exploded onto the scene. In August of 2010, RIMM had nearly 40% of the smartphone market, Apple and Google combined had a combined market share less than 5% more than RIMM's. Only 15 months later in November of 2011, Apple and Google account for more than 75% market share, and Research In Motion's market share has fallen to approximately 21% and is declining.

Current management has failed to recognize the ever changing technological demands being made by consumers. The BlackBerry served business professionals tremendously well. With no other viable options in the marketplace, the BlackBerry was best in show. Individual consumers didn't like the BlackBerry. They wanted something sexier. They wanted something more intuitive in the palm of their hand. RIMM failed miserably to recognize the consumer's desire to have a smartphone, not to mention a more functional, easier-to-use smartphone. That was the undoing of its business model. There have already been serious warning signs of trouble to come from Research In Motion, and it needs to start looking in other directions for the sake of shareholders.

RIMM has a goldmine sitting on a shelf in patents. Google (NASDAQ:GOOG) just bought part of Motorola strictly to acquire patents. Apple has been fighting with Google over that acquisition in the courts, as well as many other issues. Patents are the new hot item in the technology industry, note Facebook (NASDAQ:FB) paying $1 billion to acquire Instagram. RIMM has had service providing issues with its phones, but no hacking issues that other companies have had to deal with. That makes RIMM the ultimate prize.

Apple wants those patents to increase its share of the smartphone market, and would most likely use the patents to increase security through all of its platforms. Google wants RIMM's patents to take more market share away from Apple. Rumors are circling that Google is working on bringing its first phone to the market. That would be a huge step in its business model, and a superior secure network would sway customers to its phone. Facebook also wants those patents. As noted, Facebook just bought Instagram for the patents, and purchased over $500 million worth of AOL patents from Microsoft. Facebook has the foresight to realize that it needs to expand its business model outside just social media to maximize its potential. Samsung is not one to shy away from RIMM's patents either. Samsung has emerged as one of the main competitors for Apple. It already has a tablet, phone, computer, and cutting edge television on the market. If Samsung were able to acquire RIMM's patents, it could become a serious threat to Apple's seemingly untouchable empire.

RIMM may have failed shareholders, but it has a chance to redeem itself with those patents. Within the next 12-24 months, we could very well see a bidding war between these companies to take over Research in Motion. The bidding war won't be pretty either. Samsung, Google, and Apple are all in the middle of litigation against each other for everything from patents over the shape of a rectangle, to touch-screen technology. This bidding war could be a market changer for RIMM, although I wouldn't touch the stock with a 10-foot pole.

Disclosure: I am long AAPL.

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