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RIM is convinced it is the market leader and that customers love it

Apple, Inc. (AAPL) CEO Steve Jobs was famous for his "reality distortion field" (RDF) -- an all encompassing term referring to his proclivity for taking negatives and spinning them as positives.  But these days the new bastion of reality distortion appears to be RIM.

RIM, a company founded on business users, has lost its way.  From bizarre Saturday morning cartoon marketing pitches to screaming publicity stunts outside Apple stores, RIM's cries for attention have looked more and more desperate.  But it is the raw financials that are the most alarming.  RIM only has around $2.2B USD in the bank, and it's losing $518M USD per quarter.  And those losses are fast accelerating -- a year ago it made $695M USD in Q2 2011.

I. Investors Troubled by RIM's Perhaps Unrealistic Optimism

Amid layoffs of a third of its workforce and a half-year delay of BlackBerry 10, RIM's executive management are offering an overflowing cup of optimism.  

Vic Alboini, chief executive of Jaguar Financial, an investment firm that has sunk some money into RIM shares has been lobbying for a sale to save value for shareholders before a potential bankruptcy hits.  He was appalled by new CEO Thorsten Heins' apparent denial of the grim fiscal reality facing the firm.

BlackBerry sales
Some investors want RIM to sell its IP, business services, and manufacturing, gracefully bowing out of the handset business.  [Image Source: Christian Science Monitor]

Responding to Mr. Heins' presentation at an annual shareholder meeting this week, Mr. Alboini told Reuters, "There was no mention of a sale of the company, no mention of a breakup of the company, and again, our big, big concern is if the BB10s are a dud.  Where are we then?"

II. CEO Heins -- RIM is "lean, mean machine"

His message stands in stark contrast to Mr. Heins who at the meeting played evangelist for the much-delayed BlackBerry 10 platform and a reinvigorated management ranks.  

Preaches Mr. Heins, "I am not satisfied with the performance of the company over the past year.  Many of you are frustrated with the time it has taken us to make our way through the transition.  [But] I have assembled a leadership team for RIM that's truly capable of taking us into future."

Some wonder if there's really as much talent as Mr. Heins believes, though.  RIM's new chief marketing officer Frank Boulben comes from now-bankrupt satellite LTE firm LightSquared -- hardly a shining star.  In recent interviews he expressed reticence at doing his job -- marketing -- claiming that customers love BlackBerries so much, that they will do his job (which he is paid millions of dollars a year to do) for him.

RIMdenberg
RIM Execs: Fire? What fire?  [Image Source: Jason Mick/DailyTech LLC]

Meanwhile, talented, hard-working executives have jumped ship to companies who aren't posting half-billion dollar quarterly losses.

III. Patience is Running Out Among Investors

Mr. Heins insists BlackBerry 10 isn't vaporware.  He comments, "We're working day and night to bring it out and prove the point that it is what we say it is."

But confidence is waning in RIM, after over a year in delays that bring RIM's total time taken to productize QNX -- the OS it acquired in April 2010 -- to almost three years time.  Amid a stacked market to be soon filled with sixth generation iPhoneWindows Phone 8, and Android 4.1 Jelly Bean devices, BB10 slick package carries no guarantees, even if it does manage to complete its lackadaisical stroll onto the market place.

RIM CEO Thorsten Heins claims laying off a third of his company's workforce has transformed it into a "lean, mean machine".  But there's no guarantees cutting jobs will boost profitability, given that sales are plunging at potentially a fast enough pace to offset those gains.

If there was one shred of reality in the presentation, it was CEO Heins' acknowledgement that "other options" (aka a sale) were on the table, pending a review by the Royal Bank of Canada (TSE:RY) and JPMorgan Chase & Comp. (JPM).  Mr. Heins remarked, "There is a lot of action going on, looking at very different options for what the company could do.  When it's time to go public with it, we'll go public with it."

RIM CEO
RIM CEO Thorsten Heins admits a sale remains possible. [Image Source: RIM]

It would be tempting to dismiss this.  After all, don't all companies want to be flexible?  

That is true, but when it comes to sales there are only two types of companies that generally openly acknowledge considering sales -- rising star startups looking to be scooped up by a top corporate firm, or dying corporate firms looking to offer up their carcass to the scavengers.  You don't discuss selling, after all, if you are a large successful firm.

That sale can't come soon enough for shareholders, who are afraid that RIM's refusal to gracefully bow out will cost them dearly.  Stock fell -7.5 percent yesterday, before stabilizing this morning on a 3 percent rise.  Stocks remain at a level lower than before the shareholder meeting.

A share of RIM stock is today worth about 1/20th of what it was traded for back when the company was popular and profitable in 2008.

Source: Reuters



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This article is over a month old, voting and posting comments is disabled

By JasonMick (blog) on 7/11/2012 2:45:55 PM , Rating: 2
quote:
If the company is allowed to maneuver itself into bankruptcy, this would allow them to erase debt and maintain control of the company. The company can free themselves of the debt held by their shareholders and there's nothing the shareholders can do about it. The shareholders will now own a lot of nothing, causing them to lose their money.
Bankruptcy is not exactly a free ticket to ride, unless you happen to be GM or Chrysler.

Often the end result of bankruptcy is liquidation of some or all of your assets/units. Just look at recently bankrupt Eastman Kodak, which is selling its IP.

When a company goes bankrupt, it must attempt to repay its debts. If it has assets (say a large IP portfolio), it can often be ordered to sell them by a bankruptcy court.

And to boot, bankruptcy is ruinous to corporate image. BlackBerries already are looking pretty miserable compared to competitors like Windows Phone, the iPhone, and Android -- even BlackBerry supports like Pirks seemingly acknowledge this by choosing Windows Phones. RIM hardly needs any further loss of consumer confidence.

If RIM was being rational it would look to sell to the highest bidder. At this point is non-viable and headed on a fast track towards bankruptcy.

It will be sold sooner or later. The only difference is that if it waits to long to sell, it will be worth far less and shareholders will lose their shirt.

(Disclaimer: I own no RIM stock or stock in Microsoft/Apple/Google.)


By Belard on 7/11/2012 6:47:41 PM , Rating: 2
Sigh... When your market share is tiny, people don't buy... Odyssey2 was in some ways better than the Atari2600, never reached the high market share and died quickly.

Amiga, started dying as consumer PC prices fell and the company sat on its ass (Commodore).

RIM's BB10 is a slick looking MobileOS... it is doing things a bit differently. But they screwed up royally by being 3 years late. Understandable making QNX into a new MobileOS is going to take a while, but they should have hired more people and had BB10 come out LAST fall at the latest.

Losing $500M a qtr?! Holy smokes! Hiring an extra 50 techs to work on BB10 would have been worth it. The Playbook didn't do anything for RIM... it was half-ass. Perhaps they are trying to make BB10 perfect?! Android and iOS are not perfect either.

So lets say BB10 is finally GOOD enough in 9 months... RIM will be almost 1Billion poorer... they will need $200~300m in marketing alone.

With current BB owners running away from their phones and our 2-year phone plans... I'm not sure how RIM can pull this off.

In another 12 months, their tech will be almost worthless unless BB10 is a home-run and people actually buy it... but as we know... The lack of app developers and other factors are in play here. This isn't the days of feature-phones.

I wish RIM the best... but their arrogance and stupidity doesn't give me confidence. Even Microsoft is doing so many stupid things, I have NO confidence in them. Apple sometimes pisses me off, but I know they aren't going away.

I still think that Android can possibly save RIM if they keep with their quality of hardware with and without keyboards. Sell their products as HIGH-END Android phones.

I'd say that RIM has a 5% chance making it to 2014 with BB10. And that if they went Android, a 50% chance.


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