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Research In Motion (RIMM) is not dead. Like Nokia (NYSE:NOK) it is an underdog that trades at low valuations. Either of these investments could see resurgence in market sentiment based on the regional success of product launches or the value of their patent portfolios. If nothing else, their brands have enduring value. A sum-of-parts estimate for Research-In-Motion discovered that RIMM shares are trading well below their intrinsic value.

Research in Motion: Signs of Life

Research in Motion has lost its dominance in the smartphone market to companies like Apple and Samsung, and is hoping that the early 2013 release of its new line, BlackBerry 10, will help it get back some of its lost mojo. RIMM shares reacted positively to this hope for reclaiming market share from the iPhone and devices that run on Google's Android operating system.

However, Research In Motion isn't just waiting around. Instead, it is actively trying to re-engage customers. It recently executed a patent licensing deal with Microsoft (NASDAQ:MSFT) which would allow it to use Microsoft's file storage systems. Microsoft stated that this patent will greatly enlarge the file size that flash memory devices are able to handle, and increase the accessing speed of the files. The technology will also provide the ability to transfer data easily between many different devices. According to mobile device analyst Kevin Restivo, this injection of new technology will give investors a brief look into what the BlackBerry 10 devices will be able to do.

Patent Portfolios

Research In Motion's patent portfolio is estimated to be worth near $1.28 billion.

Brand Value

Research In Motion's brands were estimated to be worth $6.55 billion by Millward Brown's 2012 BrandZ Report. It is high on this list:

Ticker

Company

Brand Value ($B)

AAPL

Apple

182.95

IBM

IBM

115.99

GOOG

Google

107.86

MSFT

Microsoft

76.65

HPQ

HP

22.90

DELL

Dell

6.55

RIMM

Research In Motion

6.06

Book Value of Equity

Any book values associated with goodwill or intangible assets can be stripped out of the balance sheet so that their economic estimates can be added back in later:

Research In Motion Reported and Adjusted Balance Sheets ($ Millions)

Item

2012-02

2012-05

Adj 2012-02

Adj 2012-05

Assets

Cash and cash equivalents

1,527

1,467

1,527

1,467

Short-term investments

247

471

247

471

Total cash

1,774

1,938

1,774

1,938

Receivables

3,062

2,551

3,062

2,551

Inventories

1,027

1,018

1,027

1,018

Deferred income taxes

197

196

197

196

Other current assets

996

961

996

961

Total current assets

7,056

6,664

7,056

6,664

Net PP&E

2,748

2,722

2,748

2,722

Equity and other investments

337

309

337

309

Goodwill

304

-

-

-

Intangible assets

3,286

3,372

-

-

Other long-term assets

-

-

-

-

Total non-current assets

6,675

6,403

3,085

3,031

Total assets

13,731

13,067

10,141

9,695

Total liabilities

3,631

3,459

3,631

3,459

Total stockholders' equity

10,100

9,608

6,510

6,236

For the fiscal year ended February 2012, the adjusted book value of Research In Motion was $6.51 billion. It was $6.24 billion as of the May of 2012 quarterly filing.

Sum of Parts

Adding adjusted net asset value, estimates for the intellectual property portfolio, and brand value provide a total that is much more valuable than the current market capitalization of RIMM shares:

Parts

Estimated Value ($USD Billions)

Adjusted Net Asset Value

$6.24

Brand Value

$6.55

Patent Value

$1.28

Sum-of-Parts

$14.07

Market Capitalization

$3.24

Discount to Sum-of-Parts

77.0%

This is reasonable, but might be aggressive. Perhaps the brand value cannot be sold independently of the patent portfolio. Also, what if the long-term assets are tied to the brand value or cannot be liquidated?

A conservative estimate takes this into account below:

Parts

Estimated Value ($USD Billions)

Current Assets - Total Liabilities

$3.21

Brand Value

$6.55

Patent Value

$0.00

Sum-of-Parts

$9.76

Market Capitalization

$3.24

Discount to Sum-of-Parts

66.8%

Research In Motion is still a sum-of-parts value play.

Conclusion

Do not bet the farm on anything, especially not a firm that is currently in decline. Instead, as a value investment, consider allocating a small portion (less than 2%) of your portfolio to RIMM shares.

Disclaimer: This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing. Moreover, this research does NOT constitute a guarantee.

Source: Is Research In Motion A Sum-Of-Parts Deal?