BlackBerry (Symbol-BB) formerly Research in Motion (RIM)

[Michael D]

Time to back up the truck for this one. The company is worth more with someone else's software and hardware running on their network.

The Wall Street Journal reported late Tuesday that Microsoft Corp. (MSFT-Q26.020.491.94%) and Nokia Corp. (NOK-N4.800.296.43%) have also considered making a joint bid for RIM. The newspaper cites sources familiar with the matter, adding the status of the talks remains unclear.

[Bylo Selhi]

On a similar note: RIM turns down Amazon merger advancements: sources - The Globe and Mail

Research In Motion Ltd. has turned down takeover overtures from Amazon.com Inc. and other potential buyers because the BlackBerry maker prefers to fix its problems on its own, according to people with knowledge of the situation...

RIM’s board wants co-chief executives Mike Lazaridis and Jim Balsillie to focus on trying to turn around the business through the launch of new phones, better use of assets such as BlackBerry Messaging and restructuring, two sources said.

Better Amazon than Microsoft (tweedledum) and Nokia (tweedledumber.)

[IdOp]

Microsoft ... that could be the end of QNX.

[kcowan]

Up 12% in premarket trading. This is after rejecting a takeover in favour of the same old. BNN said the share price would have to be under $10 for a financial takeover to make sense.

[DanH]

How RIM can squeeze the shorts.

And for the RIM Board of Directors, who have been publicly AWOL throughout our Annus Horribilis, a dividend policy would speak to one core issue: that they actually believe the management team when they say the company’s prospects are bright and that RIM will have plenty of free cash flow next year.

Unless, of course, someone’s got a better idea; and soon.

[Rickson9]

Our source has communicated to us in no uncertain terms that the PlayBook 2.0 OS developers have been testing is a crystal clear window into the current state of BlackBerry 10 on smartphones. No email, no BlackBerry Messenger — it’s almost identical. “Email and PIM [is better] on an 8700 than it is on BlackBerry 10,” our contact said while talking to us about RIM’s failure to make the company’s new OS work with the network infrastructure RIM is known for.

We also have some more background on why RIM’s BlackBerry 10 smartphones are delayed, and it has nothing to do with a new LTE chipset that RIM is waiting on. In what is something of a serious allegation, our source told us that Mike Lazaridis was lying when he said the company’s new lineup was delayed for that reason. ”RIM is simply pushing this out as long as they can for one reason, they don’t have a working product yet,” we were told.
http://www.bgr.com/2011/12/22/blackberry-10-is-a-failure-that-wont-be-able-to-compete-company-source-says/

Yawn...unfounded speculation.

[agraham]

Time to back up the truck for this one. The company is worth more with someone else's software and hardware running on their network.

I don't understand this comment. What "network" does RIM have?

I wrote this back in September 2009:

I don't understand what RIM actually sells. I understand they have a special Outlook server plugin that pushes email to their phones immediately. My Apple iPhone is connected to the Outlook server at work and mail is pushed to the iPhone within a second of it arriving - even my desktop Outlook client takes longer.
I imagine an Android phone could do the same thing unless there are patent issues holding it back.
So ISTM like RIM has a line of average phones with average operating systems, a weak app ecosystem, a non-existant media market, and an unnecessary expensive server stack.

What am I missing?

Before I wrote that RIM dropped from $140 to $80. Since then it's been to $12.

I'm still scratching my head.

When the first mp3 players came out around 2000 I remember thinking these are a great idea but such a crappy interface. I worked for Fido for years selling really awful cell phones. Crap from Motorola or Nokia that we liked because it was the best of a bad lot. I remember thinking as soon as someone makes one device that is a MP3 player, phone, GPS and webbrowser with a proper interface it's going to be great. I didn't realize I also wanted an app platform and book reader. When the iPhone came out it was like my mind had been read.

Since the iPhone can run any app I can imagine and make, it does everything I want. It is a device that does *everything I want*.

When I look at a blackberry I see a phone with some alphabet keys. People tell me how they have some kind of ecosystem or network or something that makes them better but no one can tell me what actual advantage that offers. People tell me they have lots of customers that love the platform and I would point out people smashing their formerly loved Motorola RAZRs with glee.

Now, how is a company, starting from zero, going to convince me to replace a device that does *everything* I want? They can't. It's impossible. What is the value of a company starting from zero that has that as its goal? Zero. What is the value of a company with a creaking tower of legacy software and hardware and a sclerotic management that has let them stay in the parking lane all this time with that as its goal? Something way less than zero.

So here's my question. If we said, just for the sake of argument, that RIM phones were and always would be comparative garbage and almost no one would ever want one - what would the company be worth?

[kcowan]

RIM is a single company trying to take on Google, Apple, Samsung, Motorola Mobility, HTC, LG, and countless other companies. What’s worse, RIM’s strategy is outdated compared to those other firms’. Consumers have more choices today, and in many cases, the alternatives are superior.

One of ten slides on what is wrong with RIM. He left out Nokia/Microsoft.

[pitz]

I don't understand this comment. What "network" does RIM have?

They have the BES enterprise software framework. Which, among other things, provides for centralized management of the phones, encrypted tunnels to corporate resources (with trustworthy devices and processes throughout the entire chain!), email and IM retention, and, of significant importance to the corporate/government customers who use the BlackBerry -- everything that is done on BlackBerries can be logged and retained for as long as the corporation requires, per law, per the auditors, per legal processes, per Sarbanes Oxley, etc.

An equivalent framework simply does not exist in the Android/Apple platforms, and such is by design. The (relative) open-ness of Android and iOS means that these features, important in the enterprise context do not, and cannot (absent a major re-architecting of Android/iOS) exist on them.

I don't understand what RIM actually sells. I understand they have a special Outlook server plugin that pushes email to their phones immediately. My Apple iPhone is connected to the Outlook server at work and mail is pushed to the iPhone within a second of it arriving - even my desktop Outlook client takes longer.

Its far broader than that though. Also the BES software (or the equivalent provided for non-enterprise customers by carriers) compresses attachments in such a way to make them suitable for display in the mobile format. An advertising exec might receive a 200 megabyte .pdf file in his email from a correspondent. The BES platform compresses that 200mb .pdf, re-rendering it into a format that can be handled quickly and efficiently over the wireless circuits, as well as rendered on the device's screen without burning a ton of battery power or overwhelming the CPU. When the exec returns to his office with a fast network, the 200mb .pdf comes back to life. I guess a fancy IMAP server could do the same though, but I'm not aware of any standard being available (and certainly there would be patent issues as RIM has patents for the whole idea of adaptive compression for mobile devices...).

I imagine an Android phone could do the same thing unless there are patent issues holding it back.
So ISTM like RIM has a line of average phones with average operating systems, a weak app ecosystem, a non-existant media market, and an unnecessary expensive server stack.

The server stack, quite frankly, is the BlackBerry product that most of its loyal customers rely upon the BlackBerry to deliver. Hardly 'unnecessary'. BlackBerry without the server stack is pretty much useless.

What am I missing?

Lots.

Since the iPhone can run any app I can imagine and make, it does everything I want. It is a device that does *everything I want*.

It might do everything *you* want, but its very insecure, and heaven help you if you lose your iPhone. Also iPhones are not locked to centralized infrastructure which can be monitored, for various compliance reasons. iPhones are great consumer devices, but awful things for the enterprise/business/government environment.

So here's my question. If we said, just for the sake of argument, that RIM phones were and always would be comparative garbage and almost no one would ever want one - what would the company be worth?

I have no idea, but I don't believe RIM will be selling/making phones 5 years from now. They probably will be selling a BlackBerry OS that can be flashed as firmware into commodity/cheap Android hardware, as well as the server software that makes it all possible, and most importantly, auditable and secure.

Androids, iOS, etc., are a nightmare for the enterprise, but a lot of the younger people don't have an appreciation of the back-end sorts of things that go on with the BlackBerry phones. That's why we get a lot of very ignorant and derogatory comments out there concerning the BlackBerry, concerning businesses requiring their use, etc.

In bandwidth-constrained emerging markets, the BlackBerry with the back-end bandwidth conservation framework has also delivered smartphone service price points that are unheard of with other devices. Even domestically, a very attractive feature of the BlackBerry phones is that carriers are able to generally offer them at fixed monthly rates given their relatively low data use. Lots of families don't feel comfortable handing their kids an Android or iPhone that can rack up $200+ of data charges if the kid watches a lot of online videos, or receives a bunch of large emails.

[Bylo Selhi]

What am I missing?

Lots.

Thank you for the insightful summary of the BlackBerry advantage.

1. Most of this is relevant only to corporate, government and other enterprise users. Is that market large enough to sustain RIM, even a restructured, "leaner and meaner" RIM?

2. Is there any hope that the next generation of BBs with QNX will be able to appeal to a broader market that includes at least some consumers? My concern is that the window of opportunity has closed on RIM in that space.

3. I recall when the same sorts of arguments were made by the mainframe industry in the face of departmental minicomputers and the arrival of millions of inexpensive PCs on workers' desks. That didn't end well for the mainframe industry. The only survivor who was nimble enough to adapt is IBM, but the revenue they now derive from mainframe hardware and software sales is a far cry from what the hay days. Will RIM be another IBM—or another member of the BUNCH et al?

[kcowan]

I think these are good reasons why commentators in the know (typically BB users themselves) all say that RIM needs to split into 2 companies:
1. High margin serverco
2. Low margin handsetco
and that their move to QNX will facilitate that move. But like Bylo says: Will they have enough time to pull it off given their problems in delivery.

The mini and micro revolutions in corporate America would seem to indicate that the answer is no. They will retain their niche only for those corporations with the highest recognized need.

And even then, only a portion of every users traffic will justify the high cost treatment. e.g. the pdf holding the business plan will continue to have the high cost treatment while the pdf contining the annual Christmas letter will not. This may be handled by having two separate paths for the traffic, e.g. gmail for personal, BB for business mail. Many people already do that. This keeps photos and videos off the corporate server and prevents all the high cost overhead from applying to the volumes of personal stuff.

[pitz]

1. Most of this is relevant only to corporate, government and other enterprise users. Is that market large enough to sustain RIM, even a restructured, "leaner and meaner" RIM?

I don't know. What alternatives do corporate/government/enterprise users have?

2. Is there any hope that the next generation of BBs with QNX will be able to appeal to a broader market that includes at least some consumers? My concern is that the window of opportunity has closed on RIM in that space.

Personally I highly doubt it. Can RIM deliver a QNX device at the $100-$150 price point? Because the people that build the Android phones certainly will be able to in the future.

This is why I believe the days of RIM selling its own hardware, rather than simply rebranding and/or providing firmware/software for the hardware of others, are numbered. Kind of like IBM -- it took them a while to figure out that they could make more money selling software and services to run on others' hardware, than trying to push their expensive and feature-lacking hardware solutions (ie: the PS/2's).

3. I recall when the same sorts of arguments were made by the mainframe industry in the face of departmental minicomputers and the arrival of millions of inexpensive PCs on workers' desks. That didn't end well for the mainframe industry. The only survivor who was nimble enough to adapt is IBM, but the revenue they now derive from mainframe hardware and software sales is a far cry from what the hay days. Will RIM be another IBM—or another member of the BUNCH et al?

Yeah, I guess, the whole idea of, for instance, accounting data leaving the mainframe room, and ending up on "Personal" computers, may have been, at the time, viewed as being just as risky as the idea of business data being stored on/going out on an Android device. And as (wireless) network speeds increase, costs fall, and power efficiency of the Android/iOS devices continues to improve, RIM's advantage in terms of costs continues to suffer erosion.

I believe that Apple is going to be hammered in the future by an onslaught of $100 Android phones that have 98% of the functionality of the iPhones/iPads. A much better investment, IMHO, is to buy stock in the infrastructure providers that provide all the connectivity to keep these devices, and the Internet generally, up and running. BCE has what, a 5%+ dividend these days?

[Shine]

I would suggest that there has been a shift from a communication device - cell phone, BB, Nokia,- to a consumer device with the arrival of I Phone and that shift was supported by the emergence of social media - FB or Twitter et all.

RIM perhaps missed the social media angle just as Microsoft missed the Internet.

[Rickson9]

Interesting perspective!

[DanH]

Scoping out RIM through Buffett’s eyes

Summary: RIM doesn't fit a Buffett-inspired model but the author himself owns RIM shares.

And from earlier this month a post similar in conclusion to the Mark McQueen post further above courtesy of Aswath Damodaran...

Living within your limits: Thoughts on Research In Motion (RIM)

[Rickson9]

‘The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesman, because they’re the ones who can move the needle on revenues.”

So salesmen are put in charge, and product engineers and designers feel demoted: Their efforts are no longer at the white-hot center of the company’s daily life. They ‘turn off.’ IBM and Xerox, Jobs said, faltered in precisely this way. The salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products.’
http://www.forbes.com/sites/davidcoursey/2011/12/29/2011s-five-dumbest-tech-companies/?partner=yahootix

[Rickson9]

Name a "Lead Director" just to keep the corporate governance gadflies away from the door. If you're going to refuse to budge on really giving up some kind of board control by relinquishing the Chairman title, it's important to present the appearance that you are truly pro-good governance. In RIM's case, a 78-year-old insurance executive named John Richardson was named as the lead director. What is a lead director? No one knows, but it sounds like someone who has all the power of a Chairman without actually being a Chairman, which, thus, gives him truly none of the power of a Chairman. Pick an older person: check. Pick someone who doesn't have a clue how the mobile device business works based on his career background: check. Pick someone who has been on the board the longest and is most deferential to Jim and Mike: check. Can you imagine sitting down with RIM's lead director to ask him what he thinks of the new QNX phones? I try to picture asking my 81 year-old father that question and I chuckle.
http://www.thestreet.com/story/11358614/1/rims-board-asleep-at-the-switch.html

[Rickson9]

Research In Motion Ltd. (RIM)’s BlackBerry smartphone, which lost its No. 4 spot to Apple Inc. (AAPL) in the U.S. in the first half, fell further behind the iPhone maker and market leader Samsung Electronics Co. after new models failed to attract enough users.

RIM’s share of U.S. mobile-phone subscribers in the three months through November dropped to 6.5 percent from 7.1 percent in the previous quarter, research firm ComScore Inc. (SCOR) said. Samsung increased to 25.6 percent from 25.3 percent, and Apple consolidated its fourth place, gaining 1.4 percentage point to 11.2 percent.
http://www.bloomberg.com/news/2011-12-30/rim-s-u-s-market-share-falls-to-6-5-from-7-1-as-apple-samsung-advance.html

[CROCKD]

Today's G & M

A new leader for RIM?

Update

RIM stock jumps on reports of possible board shakeup

[brad911]

So they've dropped prices on their Playbook yet again....

Remember that saying I've always had about NEVER COMPETE ON PRICE?

Brutual execution. I actually like the Playbook, but now people are buying them as cheap tablets and when they come out with a new version who's going to pay iPad prices regardless of how much they like it. They can go onto eBay and buy the 1st version dirt cheap.

[Bylo Selhi]

So they've dropped prices on their Playbook yet again...

Actually quite the opposite IMNSHO. But your conclusion only proves my point that what they've done is so clever that the public perception is the opposite of the reality

[kcowan]

Samsung as a suitor?
Buy on Rumour. Then Sell on News...

[Bylo Selhi]

Samsung denies report it may buy Research In Motion

Samsung has “never” considered buying the Canadian mobile-phone maker, and there has been no contact between the two companies, James Chung, a spokesman for Samsung, said by telephone. Samsung also isn’t interested in using RIM’s software through a licensing deal, he said.

[brad911]

Its the business enterprise software division that will be the top asset. I don't know if RIM would be interested in parting with that. They'd likely just sell off their consumer products division or partner with someone to do that for them.

[Peculiar_Investor]

Breaking news, At Research In Motion, a new CEO vows to silence the doomsayers - The Globe and Mail

COO Thorsten Heins takes over from RIM's visionary co-CEOs, Mike Lazaridis and Jim Balsillie, at the most difficult juncture in the firm's long history

<snip>

The two former CEOs also relinquished their co-chair positions on the board, with Mr. Lazaridis becoming vice-chair of the board with special duties to examine innovation and Mr. Balsillie becoming an ordinary director.

But the radical changes at RIM, which also saw director Barbara Stymiest become board chair

Tomorrow's market action will be interesting. Anyone care to place on bet on whether this will be received as positive or negative?