What Happened To That Ozymandias, BlackBerry?

| About: BlackBerry Ltd. (BB)

I met a traveller from an antique land
Who said: "Two vast and trunkless legs of stone
Stand in the desert ...

Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away".

- Ozymandias by PB Shelley

About eight years ago, when some of us were working in the corporate world in Chicago, or New York, or Hicksville, having a Blackberry was not just hip, it was almost crucial to business success. If you were a lawyer and didn't have one, your drug-pusher client would consider you an upstart ambulance chaser. If you were a corporate would-be honcho and didn't have one, your deals would not materialize, your clients would look askance when you approached, and you would remain the eternal would-be.

Gone are those days of Research in Motion's (RIMM) absolute reign in the smartphone world. Between Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) and Samsung (OTC:SSNLF), that old behemoth has been crushed and destroyed - only "trunkless legs" remain. Once the darling of the corporate world, Research in Motion is currently struggling just to remain afloat. While its rival Apple is currently busy setting new lifetime highs on the strength of its insanely popular iPhone, I cannot help but mourn two of the biggest possible casualties of the cult of iPhone - RIMM and Nokia (NYSE:NOK).

Research in Motion and Nokia both seem to be stuck in a downward spiral. Each company largely operated in separate segments of the mobile market. While Nokia was the undisputed leader in the consumer segment, Research in Motion had a solid base in the corporate market. However, in one single swoop, iPhone managed to uproot both Research in Motion and Nokia. Other iconoclasts followed the onslaught.

The latest blow to Research in Motion has come from Yahoo (YHOO). Marissa Mayer recently announced the new phone lineup available for Yahoo employees and Blackberry was conspicuously absent from the list. However, this should not come as a surprise for RIMM as its flagship phone had been losing its corporate patronage for quite some time now.

Incidentally, this bad news for the Canadian company was countered by some relatively good news on its patent front. The company inked a deal with Microsoft (NASDAQ:MSFT) for licensing its new Extended File Allocation Table technology. RIM is currently busy working on its BlackBerry 10 line up of new devices and this deal hints about the possible direction the new product portfolio may take. The lineup is likely to be introduced in 2013. This new technology will let BlackBerry store bigger files and may appeal to the ever data hungry set of consumers. However, given the dismal market performance of the latest RIM devices, including its completely vanished tablet, I am not very hopeful about the BlackBerry 10 lineup.

However, the news did spark a little interest in the company stock, which closed about 2% higher. But, on closer scrutiny of the deal, you realize that it is yet another run of the mill collaboration between two companies and certainly not big enough to detract investors away from RIM's ongoing problems. Research in Motion is constantly bleeding money and the effect is clearly visible on its depreciating stock price.

Thanks to its deteriorating market share, the company's financial position is also in the limbo. As of March 3, 2012, the company had about $1.5 billion in cash. Its revenue stream is drying up at a fast pace. For its latest quarter, RIM reported 43% decline in its revenue. Any hopes for the silver lining were dashed by the fact that the cash woes forced the company to delay the unveiling of BlackBerry 10. Thus the company is now trapped in a vicious circle, where it desperately needs a blockbuster product to boost its cash position which it cannot get on because it doesn't have cash. Since the company did not disclose the amount it paid to Microsoft for the latest patent deal, it is difficult to say whether RIM is putting its money where its mouth is. Moreover, we have been hearing about BlackBerry 10 for quite some time now, but without getting any concrete evidence about its features. In today's dynamic environment, it is going to be tricky, if not impossible, for RIM to sustain market interest in BB10 devices.

Apart from spending money on acquiring technology, RIM had been splashing some serious cash on its job-cut related costs as well. The company recently slashed about 5,000 jobs. While these layoffs will save money in the long run, in short run the company has to bear the associated costs out of its diminishing cash pile.

So, is there any hope left for this company? In my opinion, RIM can merely delay its demise, but cannot avoid the ultimate outcome. Its subscriber base is also constantly shrinking. Apart from BB10, there is nothing else exciting in the company's cache and it looks like merely biding its time. It was rumored that the company may collaborate with Microsoft or may even be acquired by the software giant. This rumor was partially responsible for generating interest in its recent deal with Microsoft. However, now that the details about the collaboration are out, it is clear that RIM and Microsoft are not cooking up any radical collaboration plan.

While the North American market is all but lost for RIM, it still has name clout in emerging markets like China and India. However, these markets are not expected to make up for the losses the company is suffering in developed markets. The bleak picture, created by deteriorating market share and an iffy financial position, is further tarnished by the experts' opinion about the company's future. Northern Securities issued its Sell recommendation for the stock and looking at the drab future plans of RIM, I cannot help but agree with the verdict.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Author payment: Seeking Alpha pays for exclusive articles. Payment calculations are based on a combination of coverage area, popularity and quality.
Tagged: , , , Diversified Communication Services, Canada
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here