Research in Motion (RIMM) Loses More Ground - Is the End Near?

On Friday, Research in Motion (RIMM: Charts, News) co-founder and former co-CEO Jim Balsillie stepped resigned from the company's board of directors. Chief technology officer David Yach and chief operating officer Jim Rowan also abruptly left the company, which has been in a downward spiral for the past four years, ever since Apple's (AAPL: Charts, News) iPhone entered the market.

Shares have plunged from an all-time high of $133.75 in August 2008 to a humbling $14 today. The Blackberry maker announced that it was pursuing "strategic opportunities" - hinting that it may be ready to sell itself to the highest bidder. Traders have been buying up the stock in hope of a hefty acquisition premium from potential suitors, but the long term prospects of the company remain bleak.

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The company's tumultuous past four years, led by the slow reacting, maligned duo of Mike Lazaridis and Jim Balsillie, were highlighted by poorly timed product releases, delays, and a dead on arrival tablet, which accelerated its market share loss. In the fourth quarter, RIM shipped (not sold) approximately 500,000 Playbook tablets, which pales in comparison to the 3 million iPad 3s that Apple has already sold since its unveiling last month. However, it was an improvement over the 150,000 it shipped last quarter. RIM shipped 11.1 million Blackberry smartphones, 21% less than the previous quarter. This measures up poorly compared to Apple's 17 million iPhones sold last quarter. The company is also being squeezed by handsets and tablets running on Google's (GOOG: Charts, News) dominant Android system and Microsoft (MSFT: Charts, News) Windows Mobile, which is now backed by Nokia (NOK: Charts, News).

New CEO Thorstein Heins, who has been in charge since January, has yet to offer investors a clearly defined plan to get the company back on track. Heins' currently proposed strategy is to shift RIM's products away from everyday consumers and to focus on enterprise business customers - its traditional core competency. "We plan to refocus on the enterprise business and capitalize on our leading position in this segment," Heins stated. Heins' plan has been met with much skepticism, since Apple and Google's Android devices have penetrated parts of the enterprise business market as well.

While RIM's Blackberry was once an indispensable tool in corporate America, an increasing number of companies have offered their employees iPads as an alternative to traditional, bulky notebooks and dated Blackberries. Blackberry 10, the company's next operating system, was delayed to the "later part" of 2012, disappointing investors who had hoped for an earlier release. RIM blamed the delay on the necessity of a more advanced chipset necessary to run the operating system, that wouldn't be available until the middle of the year. RIM's history of product delays has been one of its critical weaknesses; fickle smartphone and tablet users are likely to follow the Apple and Android crowd, rather than wait around for the newest Blackberry device.

JPMorgan (JPM: Charts, News) analyst Rod Hall noted, "BlackBerry 10 remains on track, but we continue to believe that the smartphone operating system war is over and RIM is one of the losers." Hall also stated that RIM's target of $1 billion in cost savings by the end of fiscal 2013 was far too optimistic.

Last week, Research in Motion posted a fourth quarter loss of $125 million, a steep drop from a profit of $934 million in the prior year quarter. The massive loss was exacerbated by a $355 million writedown. Revenue also slid 25% from $5.6 billion to $4.2 billion, missing its own expectations of $4.6 billion to $4.9 billion. Shares currently trade at 5.7 times forward earnings, with a 5-year PEG ratio of 3.7, signifying slow or negative growth ahead.

Other News About RIMM
RIM's former co-CEO Jim Balsillie out from board of directors
Another familiar name steps down.
For Struggling RIM, Sale Prospects Appear Tough
RIM's on sale, but will anyone step up and buy this damaged brand? Other Stocks in the News
Sony: Report New Console Won't Support PS3 Or Used Games
Sony stands to alienate gamers with its latest move.
Why GameStop Is Worth The Gamble
Is GameStop a turnaround candidate?

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Published on Apr 2, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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