Research in Motion (RIMM) has been dead money for over 2 years now. It has been a long time since the company had 50% market share of smartphones and a stock of over $140. Ever since Steve Jobs launched the iPhone, the good old days are long over.
Many analysts through and through have written the company off. There is no question that they have been right. While it still has the dominant position in government and enterprise and a global subscriber base of 78 million, its total share of smartphones is now only 6 percent. The company was expected to earn money next quarter, but has instead warned of losses. The sole hope of the company is the new BlackBerry 10, which some think is rushed and might not impress.
Given its current state, RIMM is uninvestable for growth, momentum and dividend investors. But given its low price and asset base, it may be compelling to value investors.
- RIMM has an impressive patent portfolio that analysts estimate is worth anywhere between $2 and $5 plus per share.
- It has $4 per share of cash.
- It has the lion's share share of the government and enterprise market around the world.
- If Research In Motion wanted to sell itself, there would be many suitors. Amazon.com (AMZN), Samsung, and even Facebook (FB) come to mind. Amazon has made buyout inquiries into RIMM before and given CEO Jeff Bezos' long term thinking and ambition, it could still happen now. When these suitors buy, they typically pay a handsome premium. For example, when Google (GOOG) bought Motorola Mobility, it paid a premium of 63%. There is no reason to think that Research In Motion can't get the same type of premium.
Buying Research in Motion is not without risks. With large revenue declines and warnings on guidance, it looks like RIMM has at least one more two more bad quarters ahead of it. Given the reaction to the Nokia Lumina, the BlackBerry 10 has a slim chance of turning around Research In Motion's fortunes. The future of the company most likely is selling off the assets, returning value to shareholders, and focusing on the enterprise and government business.
While management is actively looking to reduce cost by possibly reducing its workforce by 2000 and hiring investment banks to do a strategic review, Research In Motion is not a safe buy until management actively adopts a shareholder friendly strategy. Given the stock's beta, it might bounce around $10 and $12.50 in the near term. If and when management adopts that strategy, RIMM could be one of the better investments this year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.