Ontario-based Research in Motion, Ltd. (TSE:RIM) circa 2006-2007 appeared
unstoppable. The company was beloved by businesses worldwide and was growing fast in market share and
sales. Even Democratic Presidential hopeful Sen. Barrack Obama was deeply attached to his
I. Should RIM Sell Itself?
Fast-forward five years and that vibrant company is an increasingly distant
memory. In its place is a company with a slow pace of releases, dated
hardware (the Blackberry 9860, to launch in October,
will be BlackBerry's first and only smartphone this fall to compete with Apple,
Inc.'s (AAPL) iPhone and Google Inc.'s (GOOG) Android hardware-wise). Unsurprisingly sales growth has slumped both in the U.S. and
abroad. Correspondingly, the company's stock has taken a beating at the
Toronto Stock Exchange.
Investors, desperate to see a turnaround, have implored RIM to explore a pair
The latest effort suggests that RIM sell its rich catalog of intellectual
property -- or perhaps sell its entire business to the highest bidder.
Investors salivated at Google's recent purchase of
Motorola Mobility, which brought a handsome return for shareholders. A RIM
sale would help investors recoup their losses and perhaps even profit.
Google and others are thought to be potential buyers.
The proposal is being spearheaded by Jaguar Financial Corp. (TSE:JFC). JFC refuses to
reveal the size of its stake in RIM, but it says it represents a coalition of
various shareholders who together hold a bit under 5 percent of the company's
stock (RIM has a market cap of $16.45B USD at present, so this works out to
roughly $822M USD in stock).
II. Second Proposal Suggests Shakeup in Top Executive Positions
JFC CEO Vic Alboini also expressed dismay at the company's lackluster response
to a second independent proposal.
The Northwest & Ethical Investments LP in June said that RIM's Jim
Balsillie and Mike Lazaridis's decision to split Chairman and CEO duties was
adversely affecting the company. They suggested the company assign one
executive to each post.
RIM agreed to examine the proposal, but said they probably wouldn't get around
to announcing their thoughts until January 2012. Mr. Alboini called that
slow response "woefully inadequate" and "an extreme example
that management has not let go."
III. If QNX Bid Fails Will RIM Become Nortel 2.0?
Mr. Alboini is also pessimistic about RIM's last-ditch turnaround effort with
its new QNX operating system. The new operating system, which debuted on
the company's PlayBook tablet, is scheduled to roll out to the company's
smartphones next year, replacing the veteran BlackBerry operating system.
Thus far, however, QNX has drawn mixed reviews, with many saying the best
thing about it is the ability to play (some) Android apps on it. However,
many fear that Google may close that route as more RIM devices adopt QNX.
While Mr. Alboini admits that it could have a positive impact, he says the cost
of failure is to great to gamble by counting on such a success. He
remarks in a Bloomberg interview, "The board should be
saying, 'What if these products don’t pan out?' You don’t want RIM to turn into
Nortel Networks, like RIM, used to be a highly prized Canadian mobile services
firm. But stagnation bred an eventual
bankruptcy and fire sale of the
company's intellectual property in a bid by shareholders to recoup part of
Mr. Alboini fears RIM could eventually meet a similar fate and says the time to
act is now. And he's not alone. In a highly publicized letter, a
departing executive lashed out at the
company's leadership for failing to respond to the changing market. He
remarked, "I have lost confidence. While I hide it at work, my passion has
been sapped. I know I am not alone..."
RIM categorically rejected the criticism, insisting it was doing just fine.