Here we are, May 30, 2012, and the light coming from Waterloo looks pretty dim to most. The CEO just made an announcement that the company will be losing money this fiscal quarter and that they have hired some firms to help the company weigh its “strategic options.” The stock price is not just falling, it has plummeted. This time last year, RIMM was worth around $42 a share, today the price is sitting at $10 a pop. There are tons of BlackBerry devices sitting on shelves that no one seems to want to buy. This inventory includes both PlayBooks and BlackBerry 7 devices, both of which are failing to meet sales expectations.
So, what does all of this mean for Research In Motion, the company that arguably fathered the modern smartphone? Read on past the break for my thoughts on RIM and its future…
First, let’s address the worst news which is the issue of the company’s stock. While this is a huge indicator of how well a company is doing, it does not guarantee success or failure. RIMM is currently sitting at a valuation of about $10 with a market cap of 5.40 Billion Dollars. This is still a good valuation and proves that there is life in the company. However, just a year ago the stock price was about $42 with a market cap of 22.4 Billion Dollars. So what exactly does this mean? It means that RIM is only worth about a quarter of what it was just one year ago. This is definitely not good news but it is something that the company can survive.
I also want to mention that I believe the price or RIMM has most likely reached its bottom limit. With over 78 Million worldwide subscribers, there’s no way the company will just fold and the stock price will drop to zero. RIM is actively making sales and growing the company in preparation for the launch of BlackBerry 10. I believe that this is most likely the bottom for RIMM and there is no place to go but up. I can see RIMM trading for between $8 and $10 between now and next March. Sure, BlackBerry 10 phones will launch later this year, but it’s going to take some time before they catch on and RIM can regain some lost ground.
Next, I want to address CEO Thorsten Heins’s release from yesterday. This was a strategic move on RIM’s part to help stabilize the stock price near the “bottom” that I discussed earlier. Heins emphasized the good things yesterday, like the growing subscriber base, heavy developer interest, and progress on BlackBerry 10. But he also dropped two bombshells. The first is that the company will be losing money this quarter. This was a given, especially considering the slow sales and plummeting stock price. Getting it out at this particular point in time was a smart move for RIM. They can take the sting from the announcement now, bottom out the stock price, and then when they announce the quarterly results the outlook won’t be so bleak.
The other thing that Heins addressed in yesterday’s release was the hiring of J.P. Morgan and RBC to help the company weigh its “strategic options.” This was a good move to show people that it’s not just business as usual in Waterloo. The business as usual approach is part of what brought RIM to the position they are in. With Heins acknowledging their position and telling the world that they are looking for help, this can help spark a positive turn around for the company’s image and stock price.
The only thing left to discuss now is the future. BlackBerry 10 is, at best, 2 months out. Most skeptics are saying that RIM won’t even be able to survive until BlackBerry 10 launches. I believe this is entirely false. RIM has enough cash on hand to go for at least 6-8 months while taking losses, maybe even longer. So, what if we see BlackBerry 10 launch in November? Then RIM still has more than enough money and public interest to keep the company going. It’ll probably take a good 2-3 months for BlackBerry 10 to catch on and sales to pick up, but with RIM’s cash reserves and corporate contracts, they can surely survive for that long.
In summary, I acknowledge that RIM is in a tough spot and that it looks as if we are witnessing the company’s downfall; however, I just don’t believe the hype. RIM has been a passionate company since Mike and Jim started it many years back. Though they have moved on, there are still thousands of talented individuals in Waterloo that want nothing more than to see RIM make a comeback. And that’s what they are planning for. Here’s an example of this, just in case you don’t believe me. Alex Kinsella, a key member of RIM’s team, tweeted this yesterday:
If that doesn’t show you the passion that RIM has for surviving, I don’t know what will. So BlackBerry fans, strap in and hold on cause the next few months are looking to be quite the wild ride. But just remember next year when RIM is back on the climb on the wings of BlackBerry 10, you heard they would be from the folks here at TheBerryFix.com.