RIM not Selling itself Anytime soon
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Research In Motion (NASDAQ: BBRY) has been bouncing around over the last couple weeks rising and falling on rumors of buyouts and interest from other major tech players like Samsung and IBM (NYSE: IBM). Both of those companies would greatly benefit from a purchase of RIM in different areas.
IBM has made one of the most impressive yet quiet turnarounds from a major hardware manufacturer to a services company while continuing to improve profitability and share value. Even more impressive is that IBM has done it without a celebrity CEO grabbing headlines for the company.
Samsung has also made an impressive turnaround parlaying its manufacturing experience of Apple products into its own line of highly advanced tablets and smart phones. This has left the company in litigation throughout the world as Apple (NASDAQ: AAPL) sues them in patent courts from Germany to California.
IBM would benefit from RIM’s business products including its secure networks and data encryption services, which would meld very well with IBM’s present business services portfolio, allowing them to greatly increase the services they offer to businesses. The downside would be they would really only be able to use that part of the business if they wanted to enter the handset market. This would not make sense as they have already sold off or divested their laptop and computer divisions.
Samsung conversely would be able to profit from RIM’s patent portfolio but would have no experience in the business, corporate and government sectors and would have a difficult time running a good portion of RIM’s business. It would not make good business sense for either of these companies to buy RIM outright and would have to cannibalize the parts of the business that interest them.
RIM is in dire straits but is still a good ways away from needing to seriously entertain those kind of offers. This leads me to my main point -- unless a company is willing to pay a premium for the entire company RIM will not be sold in the near future. Speculation aside there are very few companies that could run RIM’s entire business and until BB10 comes out it doesn’t make sense for either RIM to sell or a company to buy something that is yet to be proven.
Everything coming out of Waterloo is that BB10 is going to be groundbreaking. At the very best it will be revolutionary; at worst will be very competitive with other offerings in the market. Realistically, in my opinion it will be comparable to other offerings with some RIM-inspired twists.
Most experts have a too little too late policy for RIM. According to them Apple and Android-based phones have swept RIM away and it will be impossible for RIM to regain its previous market dominance or even a portion of the market. What I find silly is that everyone forgets how fast Apple’s iPhone grabbed market share. Apple had a phenomenal product, which since its release has been gobbling up more and more market share with each updated release.
Even more amusing is that there are several Android-based handset makers that a couple years ago were completely unknown. There were very few people in the general market who had ever heard of HTC, for example, two years ago.
When you look at the hard numbers RIM is in a bad position but is far from dead. They have 80 million subscribers, which is a good base to start when you release an update. They have lost business customers but are still the go-to phones when businesses or governments are looking to send encrypted and secure information.
The company's failure to mobilize during the evolution of handsets is well-documented but since that failure RIM has done everything that one would expect a company committed to a turnaround would do. They have delayed release of its new product until it is confident that it will be ready. It has laid of employees, reduced costs and changed executives running the company day to day.
RIM is not going bankrupt before BB10, they will not start selling parts of their business before BB10 and little in the company's fundamentals will change drastically until then. It comes down to this when looking at RIM as a potential value buy -- if you think that BB10 will be a success or anything less than an abject failure, it could be an interesting purchase. If you already have RIM in your portfolio depending on when you entered the stock with the price below $7 you could buy to reduce your entry point. In my opinion RIM will make a comeback, not reaching its previous heights but far from where most experts predict it will end up.
mooseelz owns shares of Apple and Research in Motion. The Motley Fool owns shares of Apple and International Business Machines. Motley Fool newsletter services recommend Apple. 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.