I find it prudent to revisit a previous article I wrote about Research in Motion (RIMM) back on April 26, in which I made a very bearish case for RIMM. I presented the case for each of the tech-sector power players to buy them, and what RIMM could bring to each of them in a buyout. On April 26, when the article was published, RIMM stood at $14.14 and has since dropped to sub $7.00 levels.
The numbers are starting to make sense to reconsider a position in RIMM now. It currently has a market cap of $3.86 billion, filing more patents, and has a patent portfolio worth more than its market cap. While it still posts a profit each year, it is burning through cash quicker than the federal government. RIMM has a major turnaround to accomplish, and it can't come soon enough.
People commented on the last article about how great the new RIMM phone would be. How it would take back market share for the former power of the smartphone market. Unfortunately, with a continually shrinking market share it is dying a slow death. A slow death that seems to be picking up steam. RIMM's new BlackBerry would have to find a way to eat some of Samsung's and Apple's (AAPL) market share. A task that would cost RIMM dearly in marketing expenses. The only hope it has is capitalizing on the numerous Samsung/ Apple lawsuits, and proclaiming itself as the true innovators of the smartphone.
The vultures are circling RIMM as we speak. Facebook (FB) is in dire straights as far as shareholder confidence goes, with a more than a 50 percent decline in its stock price since the IPO. It will be looking to make a power move in the headlines to help stabilize its public image and stock price. The patents RIMM holds are a strong move that could ensure a future revenue stream for Facebook at a time it is desperate to find them.
Apple , Samsung, and Google (GOOG) would be crazy not to go after those same patents. Mobile technology is the obvious future of commerce, and RIMM has a platform that is known as the most secure in the world. If any of these companies were to purchase RIMM, it would give it that security and another leg up in the ongoing legal battles between them.
RIMM needs to make a deal, and it needs to do it quickly. Those patents are worth a fortune to the company and its shareholders. If it continues to lose market share, suffering shrinking profits until an eventual demise into a loss, it will lose all leverage in the sale of its most prized possession. RIMM was once a great power, and should be credited for bringing us the Galaxy phones and iPhones. That time has since passed, and the board needs to recognize that before it loses everything.
Disclaimer: Always consult with a financial professional before considering if any investment is suitable for your needs. As always, never invest any money you can not afford to lose. As investment vehicles provide a significant risk of loss or part or all of your initial investment.