Is this Research in Motion's (RIMM) Last Stand?

Shares of Blackberry maker Research in Motion (RIMM: Charts, News) were dealt a critical blow last week when the company warned of an upcoming first quarter loss, disappointing investors who had expected a slim operating profit. RIM also reported a loss during its fourth quarter.

The company also disclosed that it had hired JPMorgan Chase (JPM: Charts, News) and RBC to review its financial performance. The stock has plunged 74% over the past twelve months, as the company continues to struggle against the rising tide of Apple's (AAPL: Charts, News) iOS devices and Google's (GOOG: Charts, News) Android smartphones and tablets. RIM's share of the U.S. smartphone market plunged from 44% in 2009 to 10% in 2011. Shares have dropped accordingly, sliding from a peak of $144 in 2009 to less than $10 today. Daily Chart
RIM investors are hoping that the Blackberry 10 platform, due out in the second half of 2012, can revive the company's ailing fortunes. New CEO Thorsten Heins, who replaced the maligned CEO duo of founders Jim Balsillie and Mike Lazaridis in January, remains optimistic regarding Blackberry 10, which he believes will create long-term value for shareholders. Analysts are skeptical regarding Blackberry 10's potential to save the company. The operating system, which will power the company's smartphones and tablets, has been repeatedly delayed over the past year. In February, in a move to increase its tepid tablet sales, RIM added Android compatibility to its PlayBook 2.0 software, but shied away from expanding compatibility to its other devices. RIM's VP of developer relations, Alec Saunders, reaffirmed the company's faith in RIM's operating system. In an interview in Indonesia, RIM's third largest developer market after India and China, Saunders harshly criticized Apple and Google. Saunders claimed that iOS was "designed for five years ago", and primarily focused on "media consumption." He added, "(Blackberry) is not for sitting on the train and watching TV." Saunders also derided Android's fragmentation and the difficulty of developing and testing software over multiple hardware setups. "There are now 3,977 different Android devices out there in the marketplace," Saunders stated. "For developers, it's a nightmare. It's impossible to test them all." Saunders emphasized that RIM was on track to redefine the smartphone as a communication, and not an entertainment device. Analysts, however, criticized RIM's narrow view as an "identity crisis" - unable to cater to everyday or enterprise customers, and unwilling to admit that the modern smartphone is indeed an all-in-one ultra-portable computer, easily capable of media consumption as well as casual and professional communication. While some investors are now categorizing RIM with Nokia (NOK: Charts, News), another fallen mobile icon, Nokia's prospects look far brighter. Nokia has the backing of software heavyweight Microsoft (MSFT: Charts, News), which has been spending heavily to increase the size of its Windows Mobile Marketplace, which is slated to replace Nokia's aging Symbian OS. Nokia also still dominates the low-end mobile handset segment in developing countries. RIM has neither of these strengths. One strength RIM has is its patents. In the never-ending patent wars of Silicon Valley, RIM's patents could be worth at least $8 to $9 per share. The stock is also trading at approximately half of its book value. In the event of a buyout offer, these two factors could propel shares sharply higher. Although rumors have been persistent, a viable suitor has yet to surface. Heins stated that his company remains on track to cut $1 billion in costs by the end of fiscal 2013. Part of that initiative is to layoff 2,000 members of its global workforce of 16,500 immediately. Sources close to the company hinted that the number would likely climb to 6,000 this year, with cuts affecting legal, marketing, sales, operations and human resources departments. At its peak in 2008, RIM employed over 20,000 people worldwide. Several high-level employees have left RIM this year, including global head of sales Patrick Spence. Heins acknowledged that RIM's financial performance continues "to be challenging." Other News About RIMM RIMMWarnsof 1QLoss, HiresBankerstoConductReview Storm clouds gather over RIM as the company weighs its options. BarclaysCapitalSetsResearchInMotionPriceTargetat $8.00 Barclays cuts RIM's target price to a humbling $8. Other Stocks in the News SalesforceBuysBuddyMedia Salesforce expands further into social media. MoreFacebookdisappointmentintheoffering Facebook continues to disappoint investors. Copyright 2012 by InvestorGuide.com, Inc. 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Published on Jun 5, 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 2016. Content published with author's permission.

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