RIM worth less than the sum of its parts

Research In Motion (RIM) has not had a good year, and the news just keeps getting worse. This week, the value of the BlackBerry maker’s stock fell below ‘book value’, signalling a troubling new chapter in the company’s story.  

In layman’s terms, this means that the total value of RIM’s shares (also known as its market capitalisation) became less than the actual value of the company’s assets (cash, patents, buildings, stock, equipment etc) minus its debts.

Last quarter, RIM had a book value of $18.92 per share; at its lowest point this week, RIM shares dropped as low as $18.20 in active trading on Nov 3. By the end of the week’s trading, they’d clawed back some of their loss, closing at $18.97, just a hair above book value.

Market data via NASDAQ

So... who cares, right? Well, this may not seem like something to care about, but this is a very big deal for RIM. When market cap falls below book value, it effectively means that the company’s own investors see the company as being worth less than the sum of its parts. The bigger problem is that it indicates the wider market has no confidence in the company and its long-term prospects, and that could be a major headache if RIM’s increasingly stumbling management decide they want to put the company up for sale.

It’s no secret that RIM has had a terrible year. The company’s PlayBook tablet got a lukewarm reception, catalysed by issues such as the bizarre exclusion of a native email client. RIM recently announced an embarrassing delay to its next update for the PlayBook OS, meaning it won’t deliver email to the device until February 2012 at the earliest, almost a year after its launch (and it now won’t bring the BlackBerry Messenger (BBM) service to the device in that update at all).

In August, RIM hit the headlines for all the wrong reasons as it emerged that the wave of riots and looting that began in London and spread to cities across the UK had been extensively coordinated through BBM.

Last month, the company then blundered its way through a PR disaster of its own making as its services went offline across much of the world for four days, due to a botched system upgrade that also saw the failure of the system’s redundancies; RIM’s delays in acknowledging the problem and keeping its customers informed didn’t do it any favours, nor did the fact that service was fully restored only a day before the iPhone 4S went on sale.

While the company’s fortunes clearly lie in the transition of its phone portfolio to its recently announced BBX operating system, the first phones with this OS are still months away. Until then, RIM will be stuck selling products that are clearly failing to excite buyers, given the company’s catastrophic decline in market share (two years ago, RIM had 46% of the US smartphone market – now it has just over 9%).

The decline of RIM's share value this week may not sound like a big deal on the face of it, but in the broader context of the company’s performance, its prospects look exceptionally bleak. The evident lack of confidence in RIM among both investors and consumers is a very real and immediate problem that the company may find it is simply unable to resolve. With months to go until the company’s hero products are due to arrive, that’s a long time for RIM to try to hold its head above the water.

The company lost one of its largest investors in June following poor first quarter results. The continued decline in the company's performance may incite other nervous investors to start cashing out long before then, which would only push RIM’s share price down further, making it ripe for a takeover.

It seems that the possibility of RIM going under is starting to look very real indeed.

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25 Comments

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As someone who has Windows Phone 7 as a personal phone, and BB Curve somethingorother (3G / 4G) I can honestly say

DIE RIM DIE

Oh, I'm also canadian, but this just makes us canucks look bad.

I'm not a RIM fan but I've used BB's for the past 3 years because of work. I can tell you now that I would not give up my BB for an iPhone, not even if it was free. I'd rather go with andriod phone or stick with RIM.

KingCrimson said,
I bet 90% of RIM users that are thinking of switching will buy an iPhone.

I was included in one of those 90% of your prediction. But after seeing Samsung Galaxy SS II, I decided to wait. Then I changed my mind, because I didn't have the money to afford it.
So, I'll be sticking with my oldy bb 8900 for a little longer.

P.S.: WP7 is not available in my country... And I have low (for not saying "no") hopes that it will see the light of the day in my country (Though WP6 and 6.5 made it...)

The sooner the better, As for why people dislike rim..why like a company with outdated products who cant catch up with current times. Typical Canadian mentality..if its good dont change it and hope for the best. well that doesnt work..one needs to innovate.

smooth3006 said,
i cannot understand why people hate blackberry's soo much? yes i prefer android but i see nothing wrong with rim either.

I agree with you, at least is not apple...

smooth3006 said,
i cannot understand why people hate blackberry's soo much? yes i prefer android but i see nothing wrong with rim either.

As a full grown adult male trying to use those stupid little keys, I find a lot wrong with RIM. That's just a start.

Speaking as someone who has had to regularly support RIM devices when they had their time this is almost retribution for craptastic software, questionable battery QA and high failure rates during my encounters.

Aergan said,
Speaking as someone who has had to regularly support RIM devices when they had their time this is almost retribution for craptastic software, questionable battery QA and high failure rates during my encounters.

Your encounters are rare buddy. Yes it had buggy software in OS5 but RIM is known for good battery life and 1/3 the data because of its excellent compression compared to iPhone and Android devices. Also it was just posted on friday that RIM had the LEAST amount of hardware failure.

Why do people hate RIM? who knows. I think little people from the android market actually hate RIM. Its actually all the iPhone users who are so childish thinking all Apple products are superior who hate not only RIM but Android and Windows Phone devices as well.

I have to say i truly believe that the passing of Steve Jobs will be the start of apple's failure in the next 12 months. Apple's iPad is complete junk! I dont know how anyone can use it let alone it being the most popular tablet by far? The thing is crippled compared to Android devices and although RIM's Playbook is one of if not the worst selling Tablet so far it is my personal favorite. Especially if you have a blackberry it just murders the competition. That is the main reason for the Playbook's failure is because RIM only has %10 marketshare in the US.

RIM will bounce back.

Frank2029 said,

Your encounters are rare buddy. Yes it had buggy software in OS5 but RIM is known for good battery life and 1/3 the data because of its excellent compression compared to iPhone and Android devices. Also it was just posted on friday that RIM had the LEAST amount of hardware failure.

Why do people hate RIM? who knows. I think little people from the android market actually hate RIM. Its actually all the iPhone users who are so childish thinking all Apple products are superior who hate not only RIM but Android and Windows Phone devices as well.

I have to say i truly believe that the passing of Steve Jobs will be the start of apple's failure in the next 12 months. Apple's iPad is complete junk! I dont know how anyone can use it let alone it being the most popular tablet by far? The thing is crippled compared to Android devices and although RIM's Playbook is one of if not the worst selling Tablet so far it is my personal favorite. Especially if you have a blackberry it just murders the competition. That is the main reason for the Playbook's failure is because RIM only has %10 marketshare in the US.

RIM will bounce back.


I think on the consumer side it's an image thing. Both the iPhone and Android are considered "new". Plus there's a bunch of stereotypes that BlackBerry needs to break.

Frank2029 said,
...

His account is not rare, I work in telecommunications and I can tell you that RIM phones are crap once they reach a certain age, lockups, battery refusing to charge, etc, etc.

When you send a phone to RIM and they can find no defect, they charge you to ship it back.

RIM is over, their tablet is a failure because you NEED a blackberry to make any good use of it, and it's tiny.

There is not much good left about RIM, and they seem to be having a bitch of a time turning QNX into BBX

RIM was good when there weren't options, now the options make them look antiquated by comparison.

Nokia's market cap is below book value, but it's still above tangible book value.

Book value includes goodwill, which is a worthless accounting trick.

I still talk to admins who think their phones are oriented towards businesses and emails better. We don't all need apps.

I don't understand though, they are hugely popular with teens in the UK. Cheapish phone with free IM.
Personally though I dislike all their products. Feel very outdated. Still, they are great to manage in a business environment.

SK[ said,]I don't understand though, they are hugely popular with teens in the UK. Cheapish phone with free IM.
Personally though I dislike all their products. Feel very outdated. Still, they are great to manage in a business environment.

iMessage came out this year so BBM is no longer an exclusive draw.

SK[ said,]I don't understand though, they are hugely popular with teens in the UK. Cheapish phone with free IM.
Personally though I dislike all their products. Feel very outdated. Still, they are great to manage in a business environment.

Cheapish?

Some models, yes, but the 9900, 9860, 9810 are still almost priced as much as the iPhone 4 / Galaxy S2 with a 24 month contract on one of the UK's leading service provider.

Great build quality on some, but they need to start pricing reasonably if they want to survive.

dagamer34 said,

iMessage came out this year so BBM is no longer an exclusive draw.


Agreed. BBM will be dead as soon as carrier start providing custom plans for the iOS as they do for the BB OS.

Rim is going to have to do something drastic soon. I'm curious what that will be. Is a company like Microsoft going to buy them out? Or are they going to hope an Android player for their new BBX OS will save them?

I wonder if they'll end up taking the same direction as Nokia? It's a lot less likely, but they have comparable situations.