RIM Should be Worth at Least as Much as its Parts
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I understand everyone is singing the impending doom of RIM (NASDAQ: BBRY) and how the company will cease to exist one day in the not so distant future. This is obviously a possibility, especially for a company that has found itself in RIM’s present situation. An interesting thing happened though recently as RIM’s stock took another dive in a series of dives that has seen the share price tumble over 90% since 2008. RIM went below the 10$ mark and with it went its market cap below 5 Billion dollars. According to Yahoo Finance as of June 5, 2012 at 9:45 am, its market cap sits at 5.01 Billion dollars. This is interesting because at this price, RIM is being valued less then its non-operating assets. Even if you didn’t take into consideration the 2.1 Billion dollars it has as of its last quarterly statement in cash and cash equivalents, its network and portfolio of patents would easily fetch over 5 billion dollars in a sale.
Its network with over 77 million users whom pay a monthly fee to receive emails to their BB handsets would mostly migrate to other devices, but the network could still easily fetch 1 billion dollars or more on the open market. Its portfolio of patents though is by far its most valuable assets. RIM was part of a consortium of bidders who paid a combined 4.5 Billion for the collection of Nortel patents. Google (NASDAQ: GOOG) had offered Nortel 900 million earlier for their portfolio but was turned down as they looked for better offers. If RIM decided today to sell its patent portfolio, it would surely ignite a bidding war between all the major handset makers in the market. Google’s purchase of Motorola and its interest in Nortel would make it a potential buyer. Its mountain of cash would also enable it to go deeper in a bidding war for the valuable RIM patents.
Apple (NASDAQ: AAPL) who was part of the consortium that bid with RIM for the Nortel patents would be another company flush with cash who would find RIM’s patent portfolio extremely valuable, even if it was just to not allow a competitor to have access to the technology. RIM's patent portfolio could easily fetch a similar bid to that of Nortel's in the mid 4 Billion dollar range conservatively speaking. So not including its cash on hand, RIM could easily be valued at 5.5 Billion dollars. As I write this blog it seems RIM will jump above 10$ by the end of trading, but the fact that it would go to a price below its assets value shows what the market thinks of its future.
I have written a couple other blogs including my thoughts on RIM, which are that it’s not as bad off as many people like to say it is fundamentally. This most recent drop in price is a perfect example of the market valuing a stock below its tangible asset value because of how truly hated it has become. The positive side to this is if it can, which seems recently to have become a big if, successfully release its new operating system and handsets have a real turn around. I am not saying an Apple like turnaround, when Apple went from being a $40 a share company to where it is now.
I do see though a lot of potential in its global growth outside of North America and Europe and if it can recapture a couple percentage points of market share over in the short term it can rebound solidly. It does have the cash to hold on through a couple quarters of losses and bad weather, but RIM really needs to demonstrate something soon to show that it is worth something. Since its executive shake-up it has demonstrated the willingness to move on from its past and look forward. The hiring of outside banks to help it with strategic planning, a change in CEO and many executives from the old guard departing does bode well for the company to be able to make the change necessary to rebound.
mooseelz owns shares of Apple, Google, and RIM. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.