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No potential buyers have expressed interest in the phone unit

Waterloo, Ontario-based RIM is facing a daunting task by trying to make its next generation BlackBerry – which is running the new QNX-derived BlackBerry 10 operating system -- a success.  Due out next year, RIM must somehow trying to jump over a series of high hurdles including impotent managementweakening brand image, a crowded market, and a significantly shrinking engineering department.  

To be successful, RIM must beat rivals like Google Inc. (GOOG), Samsung Electronic Comp., Ltd. (KSC:005930) and Apple, Inc. (AAPL) who have proven success in consumer smartphone sales, as well as struggling, but deeper-pocket players like Microsoft Corp. (MSFT).

If the much-hyped and much-delayed BB10 platform is unable to beat the rest of the field in features and revive sales -- an outcome expected by many -- RIM's leadership will likely be forced into the option they have resisted the most -- a break-up and sale.

In a new report by Bloomberg, two sources close to RIM and the independent bank review panel -- the Royal Bank of Canada (TSE:RY) and JPMorgan Chase & Comp. (JPM) -- it hired to assess its options say that International Business Machines, Inc. (IBM) has approached RIM with serious interest to purchase its enterprise division.  IBM is one of the enterprise technology sphere's greatest powers and it arguably has the experience to repurpose the unit, hence this seems like a reasonable fit.

IBM servers
IBM is a top enterprise service and hardware provider. [Image Source: IBM]

But analysts say the potential sale will likely be put on hold while RIM waits to see whether BB10 finds fortune or failure.  Adnaan Ahmad, an analyst at Berenberg with a sell rating on RIM’s shares, comments, "If they were to offload this, they are offloading their jewel.  They want to give BlackBerry 10 a go, so I don’t think this would happen until next year."

That could actually benefit IBM, as failure of BB10 may lead to greater desperation at RIM and a fire-sale price for this prized unit.  The unit, which made $4.1B USD in service fees charged to mobile carriers in 2011, is currently valued at $1.5-2.5B USD.  But that value could dip lower depending on the fortune (or more aptly, lack thereof) of BB10.

IBM is reportedly considering gutting the Rimdenberg. [Image Source: Jason Mick/DailyTech LLC]

If the sale happens, the big question is who -- if anyone -- will want the phone unit.  No parties, according to the Bloomberg sources, have expressed interest in buying all of RIM since the review.  Likewise, interest in buying the struggling phone unit has been non-existent.

While waiting to sell may ultimately burn shareholders by devaluing the phone and enterprise service units, in a way, long-term shareholders don't have much more to lose.  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: Bloomberg

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BB10 can be successful
By tayb on 8/10/2012 1:18:18 PM , Rating: 2
Despite all of the claims and bad press RIM actually isn't in that bad of shape. In Q3 2012 they shipped 14.1 million phones, had revenues of $5.2 billion, and earned a net income of $285 million. The global subscriber base grew to 75 million customers in the quarter and they ended the quarter with $1.5 billion in cash.

The numbers actually look better when you factor in the $485 million write-off for the failed Playbook.

The smartphone market is still very much evolving, they are still shipping plenty of phones, and they aren't bleeding cash anymore. BB10 looks impressive and given the existing market for BB phones I really don't understand all of the dire warnings about RIM. The only thing I would be worried about is their ability to actually ship BB10 in a reasonable time frame. They've been working on the OS for a really long time and it seems like it keeps getting delayed and delayed. If they can get BB10 out in Q1 '13, it's not buggy, and they have some good hardware behind it, RIM will be fine.

RE: BB10 can be successful
By retrospooty on 8/10/2012 1:32:15 PM , Rating: 5
Not sure where you are getting those #'s.

"RIM lost $518 million — and it’s the second straight quarter in which RIM has lost money, following a $125 million loss last quarter.

RIM does have cash to continue, and if they were "firing on all pistons" so to speak, they could make it, but they arent. Not even close... I would worry more about the fact that they just cant execute anything right anymore. It's taken 3 years to get a QNX phone out. They just cant compete against Apple and Google. They have only 5% marketshare last quarter, and 2 more quarters to go before they have a phone out. Basically starting from scratch.

good luck.

RE: BB10 can be successful
By WalksTheWalk on 8/10/2012 5:28:23 PM , Rating: 3
RIM is coasting on pure inertia at this point, keeping their BlackBerry fans happy with the type of devices they are used to. As their users want more they will start to lose them to Apple and Google. BB10 has to be something incredible since they are playing catch up to Apple and Google who are several generations into their mobile OSes, plus have great features and services.

I just don't see it happening for RIM. I think the gap is too large for them to bridge at this point. Added to that, they will need to have a bunch of cash on hand to withstand the onslaught of patent lawsuits if they start to regain market share.

“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith

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