BlackBerry maker Research in Motion is being pursued by a jaguar who knows there is value in the company but not quite how to unlock it. Can he succeed?
Now that RIM shares have been pounded to near their 52-week low, Victor Alboini of Toronto's Jaguar Financial has bought into the company because there's value in its products and patents, if no longer its founding co-CEOs, Mike Lazaridis and Jim Balsillie.
What RIM needs now is either a transformational CEO or a sale of the whole company, Alboini told IBTimes.
Despite the 18 percent pounding RIM shares took over disclosing dismal second quarter results last week, the Waterloo, Ontario-based BlackBerry maker is not cheap. Its market capitalization is still $12.47 billion and enterprise value --- the key takeover metric --- is $10.1 billion.
So RIM could show itself to a private equity buyer such as Silver Lake Partners or TPG with deep pockets and experience owning technology companies to boost their value.
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RIM closed Friday on U.S. markets at $23.93, down $5.61. Its 52-week low was $21.60. It took a similar pounding on the Toronto Stock Exchange.
Alboini's Jaguar Financial owns slightly less than a 5 percent stake. Large institutions and mutual funds, largely Canadian, own more than 70 percent of RIM and Alboini, a veteran mergers awyer, knows many of them. He declined to tell IBTimes who he has contacted.
A U.S. Securities and Exchange Commission check on Sept. 17 shows no new investor filings. But Alboini, a devoted BlackBerry user along with tens of millions of others, believes there is value in the brand.
Untested, he told IBTimes, is the value of RIM's more than 8,300 patents as well as whatever it got from a 4,500-patent trove for which it spent $780 million last quarter alone, as part of a syndicate with Apple, Microsoft, EMC, Sony and Ericsson.
Recall that Google dropped out of that auction at $900 million, then immediately contacted Motorola Mobility about its patents and ultimately decided to buy the whole enterprise for $12.5 billion. That deal is a long way from approval.
But Alboini, as well as other analysts, said the IP in RIM's trove, as well as its expertise in the corporate or enterprise market, could be the key to unlock its value. One reason is that RIM operates like a cable operator, with a steady stream of monthly service revenue. The question is how.
Another key metric in the latest RIM report: more than 56 percent of sales came from outside North America and the U.K., with particular strength in giant developing markets like Indonesia, Brazil and China. RIM has five million customers in Indonesia alone.
The reason is that BlackBerrys are cheap, said Alboini. Under better management, RIM could make them as big a hit worldwide as Apple has with the iPhone. RIM shipped 10.6 million BlackBerrys in the second quarter.
Meanwhile, RIM, mimicking Apple's iPad, shipped only about 200,000 BlackBerry PlayBooks in the quarter, a foray into the tablet sector. It was a disaster to ship them without functioning e-mail, Alboini told IBTimes. It was if RIM management sold a product incompatible with its crown jewels.
RIM reported earning only $329 million or 80 cents a share, 7 cents below estimates, as revenue slumped 10 percent to $4.17 billion. Moreover, the company forecast third quarter earnings between $1.20 and $1.40 a share on revenue between $5.3 billion and $5.6 billion.
A year ago, RIM said second quarter net was $475.6 million, or $1.46 a share, on revenue of $4.62 billion.
Apple alone shipped about 20.3 million iPhones and 9.25 million iPads in the period ended June 30.
Jefferies analyst Peter Misek downgraded RIM shares to Underperform from Hold, noting sales of new BlackBerry OS 7 phones were lackluster as sales of older units continued to deteriorate.
Misek also believes RIM will try to rush a smartphone based on the QNX technology recently acquired in time for January's Consumer Electronics Show.
However, Misek noted RIM developers are having problems integrating the QNX phone with e-mail and calendar functions.
Meanwhile, new products are expected to be unleashed to consumers soon, including a Kindle tablet from Amazon, Android-based Chinese phones from HuaWei and ZTE priced around $300 as well as Apple's iPhone 5.
Alboini and potential other activist investors might demand RIM auction itself or perhaps launch a patent sale similar to Eastman Kodak's current exercise or InterDigital's entire self-auction. The company could also hold itself up to a private equity buyer such as a Silver Lake Partners or TPG with deep pockets and experience owning technology companies to boost their value.
With about 8,300 patents, a sale could prove lucrative, although the preferred method in a fast-growing sector is for the owner to arrange cross-licenses and derive royalties. The portfolio could be valued as high as $2 billion, some analysts suggest.
Meanwhile, RIM's OS could stand to lose further market share behind Apple and various Google Android OS products if Microsoft manages to get enough vendors to install Windows 8 tablet OS which it released to developers last week.
Market researchers IDC and IHSiSuppli said it remains in fourth place in mobile market share vs. Apple, Samsung and Nokia.