Canadian Gov't Greenlights Potential Sale of Research in Motion
April 2, 2012 2:31 PM
comment(s) - last by
Sale or service licensing appear most compelling options for RIM right now -- RIM is leaning towards licensing
Things have reached the crisis point for Waterloo, Ontario based phonemaker Research in Motion, Ltd. (
). Once the
darling of the industry
, pushing the smartphone into the mainstream, the gadgetmaker has since been
passed in the demanding handset market
by Apple, Inc.'s (
) iPhone and a host of Android phones from Asian gadgetmakers.
I. RIM on Sale?
The dire state of affairs at RIM was highlighted by the company's
first GAAP adjusted net loss
after years of big profits. While that loss was driven by a one time charge (otherwise the company would have posted a profit of $418M USD), it nonetheless highlighted the financial fragility of the veteran firm.
The loss prompted the resignation/explusion of
company co-founder and long time co-CEO Jim Balsillie
. And it prompted new CEO Thorsten Heins -- in the uneviable position of trying to right what appears to be a sinking ship -- to talk about something
some top investors
long been clamoring for
: a sale.
A potential sale received a boost on Friday when Canadian Federal Finance Minister Jim Flaherty said that Canada would not move to block a foreign takeover/purchase of RIM. He commented, "They will be the masters of their own destiny. We would like RIM obviously to be successful as a Canadian company, which it has been — a very innovative and successful company."
While Mr. Heins insists that a sale is not the leading option for the troubled phonemaker, he acknowledged for the first time that it's an option on the table as RIM conducts an exhaustive review of its business.
One constraint on a possible sale is RIM's unique relationship with the
U.S. Department of Defense
(DOD). The phonemaker's encrypted handsets are almost exclusively adopted by DOD officers. The DOD is among RIM's top sustaining business/government customers, and any possible sale would likely need to pass an exhaustive DOD national security review.
Any possible sale of RIM would likely also require the approval of the U.S. Department of Defense. [Image Source: BlackBerry Cool]
For that reason top potential buyers are believed to largely be American firms, such as Dell, Inc. (
) or Hewlett-Packard Comp. (
) -- two veteran personal computer makers looking to refine their business hardware offerings. Other possible purchasers include Microsoft Corp. (
) whose email and connectivity software solutions could be complemented by RIM's secure services, or Amazon.com, Inc. (
) the world's top e-tailer who continues its push to expand into new markets like connected services.
An outside candidate is reportedly Nokia Oyj. (
), as Nokia has at times looked to add differentiating value-add services to its portfolio as showcased by its acquisition of Chicago, Illinois based navigation-services firm Navteq.
RIM stock jumped on the prospect of a potential sale.
II. RIM is Sticking With Consumer Hardware -- For Now
As with much of its recent troubles, RIM's announcement of examining new directions was marred by poor delivery and confusion.
and others initially released reports that made it sound as if RIM had committed to a complete pullout from the consumer market (think HP's webOS). Actually, RIM merely had decided to "refocus" on its core enterprise business, although consumer sales will continue.
Analysts like Anil Doradla of William Blair were skeptical of RIM's new efforts yielding a turnaround. In a note
, Mr. Blair comments, "We believe RIM will be playing catch-up for the next year or more, and is subject to further share loss, subscriber churn, pricing pressure, and margin pressure. In our view, believing in the potential solutions requires a leap of faith that we are not willing to make."
Ironically the shakeup at RIM comes as the company's
most attractive smartphone OS
most attractive smartphone
most attractive tablet experience
(PlayBook OS 2.0) all were headed towards market -- or in the case of PlayBook OS 2.0, just released. The status of BB10-powered "London" is now somewhat uncertain, although ostensibly RIM will stick to its prior commitment to its launch.
"London" faces an uncertain fate at RIM. [Image Source: NeoWin]
As an alternative to a sale, RIM is considering licensing its secured services for use with other operating system platforms. Likely the first target platform would be Android, both because it is the world's most used smartphone platform, and because RIM already has a great deal of experience with the underlying source code. It created emulating firmware to allow Android apps to run on the BlackBerry PlayBook or be easily reprocessed to run with direct PlayBook-centric API calls.
The issue with licensing would be that it would leave RIM's own first-party hardware in a precarious state. However, it might be liberating for the phone company, who derives
most of its revenue from its services
, not its handset sales. RIM had been transitioning from an original equipment manufacturer (OEM) role to contracting original design manufacturers (ODM) for new designs like the PlayBook [
While the company owns the distinction of having the most well-regarded physical keyboards in the industry, it would likely have to turn to ODMs to keep up with its rivals in terms of touchscreen and slim handset design. At the end of the day, it might simply be easier to quit the handset business altogether and focus on server sales and service sales.
Still, at this point anything -- a sale, a switch to ODM driven handsets, a multi-platform shift to a licensing-centric business -- is possible. At last count RIM had less than $1.5B USD cash-on-hand to weather the storm, so any sort of non-sale option might require the company taking on debt -- a prospect that may trouble investors.
This article is over a month old, voting and posting comments is disabled
RE: Forgive my ignorance
4/2/2012 10:06:11 PM
Strange, i thought government regulation of corporations was the solution to all our economic woes.
"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein
RIM Sinks Further with $125M Fiscal Q4 Loss, Key Execs Leave
March 29, 2012, 9:14 PM
Report: RIM to Slash BlackBerry Service Fees After Second Gov. Agency Leaves
March 6, 2012, 11:17 AM
PlayBook OS 2.0 Drops For Lucky RIM Fans
February 21, 2012, 10:40 AM
Sleek BlackBerry London Leaks, RIM Prepares PlayBook OS 2.0
February 2, 2012, 12:31 PM
Big Investors Struggle to Break Jim Balsillie's Grip on RIM's Board
December 27, 2011, 11:02 AM
ASUS' ZenWatch to Arrive Wednesday, Feature Sub-$200 MSRP
September 1, 2014, 2:40 PM
Microsoft Teases Lumia 730 "Selfie" Smartphone Ahead of Thursday Unveil
September 1, 2014, 9:45 AM
Reports: Apple Has Signed on American Express, Visa, MasterCard for Mobile Payments
August 31, 2014, 5:22 PM
Numerous Leaks Detail 4.7" iPhone 6 Processor, RAM, Cellular and NFC Capabilities
August 29, 2014, 10:37 PM
Buzz Grows Over Upcoming Lenovo Vibe X2's "Layered" Rim, Intel Chip
August 29, 2014, 4:59 PM
Sprint Intros Free Wi-Fi Calling for Overseas Travelers
August 29, 2014, 11:30 AM
Most Popular Articles
Microsoft's Surface 2 Tablet Family Gets a $100 Price Cut
August 25, 2014, 1:16 AM
Owner of "Decepticon" Maserati Ordered to Appear in Court This Thursday
August 25, 2014, 7:55 AM
Windows 9: "Upgrade Now" Button Coming for Enterprise Updates, ARM Preview in H1 2015
August 26, 2014, 8:00 PM
Second ZMapp-Treated Patient Dies of Ebola, Supplies Run Out
August 25, 2014, 7:03 PM
L.A. Unified School District’s Apple iPad Contract Canceled Following Heavy Criticism
August 26, 2014, 12:37 PM
Latest Blog Posts
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information