RIM Positions Itself as Takeover Bait
Amanda is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The past few years have been pretty rough for Research in Motion (NASDAQ: BBRY) and 2011 was worse still. Now, after several missteps and bad calls, the company is apparently considering a move to calm investors and show that it is attempting to change the corporate environment that has crippled its ability to compete. Strong rumors abound that have co-CEOs Mike Lazaridis and Jim Balsillie stepping down as board co-Chairs, setting the stage for the appointment of Barbara Stymiest, a board member of five years. Are things really changing, or is the company just primping for the next suitor?
For years, Lazaridis and Balsillie have run the enterprise almost as an afterthought. Once the leader in the smart phone market, it now commands only 10%. This has come about purely because the two CEOs have consistently refused to keep up with the times, and the market. Why would those who know better run a company into the ground? In order to make itself an attractive acquisition, that’s why.
When I was in graduate school, I wrote a research paper about the signs that meant a manufacturer was streamlining itself for a buyout by another company. Usually, these businesses start selling off assets that have value, except for the ones that make them attractive to buyers. They don’t hire new workers and spend nothing on research and development. Essentially, they become a shell that can be easily inserted into the new owner’s current operations. Usually, though, there is at least one gold nugget that the buyer is really after—either to add it to their own arsenal or to take it off the board.
It’s fairly easy to see how RIM fulfills these parameters. Instead of nurturing their signature product, they have let it flounder. Once so coveted and well-known that even Luddites were familiar with it, the Blackberry is quickly losing its place in the hearts and minds of, well, everyone. This is directly attributable to the fact that RIM simply would not keep up with new technology, allowing competitors Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) to completely blow them out of the water. John Donahoe, CEO of Ebay (NASDAQ: EBAY), notes that his company had one hundred engineers working on shopping apps for iPhone and the same number working on Android, compared to the “one or two” that RIM put on its Blackberry update team.
Evidence abounds that the company has lost interest in moving forward. The company is consistently a day late and a dollar short when it comes to competing with the latest technology from Apple and Google. From the Blackberry Storm to the launch of the pitiful PlayBook tablet in response to the iPad2, RIM is always the last guy to the table. They have one or two tricks up their sleeve, though, most notably their network operation centers (NOC) and the fact that global subscribership is up, somewhere around 75 million.
Still, RIM isn’t ready to be absorbed. Buyout rumors began to gain momentum last fall, but an overture by Amazon (NASDAQ: AMZN) was rebuffed and talks with Microsoft (NASDAQ: MSFT) and Nokia (NYSE: NOK) have gone nowhere. It seems that they are waiting for the perfect moment, and the perfect buyer. It also seems as if they are planning to add another item or two to their bag of tricks.
The planned shuffle at the board level seems more like window dressing than a true change of direction, since the two executives that have driven the company to its current state of distraction will still be at the controls. Analysts report that RIM won’t entertain any buyout offers until it develops and test drives its new Blackberry operating system, QNX. It seems that investors would do well to stay away until then, as well.
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