Should Research in Motion Sell BlackBerry and Call it Quits?
The company was on top of the world. Now it's on the cusp of bankruptcy, an asset shakeup, or some other development that will undoubtedly change the face of the BlackBerry maker.
It all started with the simple announcement that Research in Motion (NASDAQ: RIMM) had hired a couple of banks to "assist the Company and our Board of Directors in reviewing RIM's business and financial performance."
In short, RIM claims that these advisors -- J.P. Morgan Securities (NYSE: JPM) and RBC Capital Markets -- "have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives."
This sounds good on paper. But is it all a bunch of wishful thinking?
RIM said that there will be "significant spending reductions and headcount reductions in some areas throughout the remainder of the fiscal year." The company tried to cushion this fact by saying that it will hire in "key areas," including those associated with the launch of BlackBerry 10, "and those tied to the growth of our application developer community."
Research in Motion has yet to announce how many workers it plans to eliminate, but some analysts believe that the firm could layoff as many as 5,000 people. Meanwhile, M&A experts here at Benzinga tell me that corporations aren't typically willing to pay for J.P. Morgan and RBC Capital's services unless they are looking to buy another firm, sell assets, or sell the entire company.
That said, it is highly unlikely that RIM will make an acquisition. While the firm was expected to be profitable next quarter, RIM has now announced that it will incur a loss.
Countless analysts responded to this development by downgrading their outlook on the company; Wedbush, Bank of America, Raymond James, Jefferies, and Canaccord Genuity all reduced their respective price targets on RIM.
"The degree of the miss and actual loss is surprising," Scott Sutherland, the Managing Director of Equity Research at Wedbush Securities, told Benzinga. "My checks were bad for devices and U.S. Enterprise subscribers, as seen in my note from this morning, but this is really bad."
Thus, the chances of a RIM acquisition are slim to none. This means that the company is probably going to sell some assets -- or, if nothing else, is looking to see how much they are worth.
Microsoft (NASDAQ: MSFT) is bound to be interested in any patents that RIM has to offer, and if it weren't for the fact that Google (NASDAQ: GOOG) just spent several billion dollars acquiring Motorola, it would be interested as well. And if any of those patents can be resold to Facebook (NASDAQ: FB) for half a billion, even better.
Who else would be interested in Research in Motion? Nokia (NYSE: NOK) doesn't need the company's brand, its OS, or its phones (all of which are enduring a slow and painful death). But Nokia might have the desire to acquire some of RIM's patents.
If, however, there's one company that will stay away from the BlackBerry maker, it's Amazon (NASDAQ: AMZN). According to an unconfirmed report, the online retailer wanted to acquire Research in Motion last year. But the deal fell through, leaving RIM without a buyer. Since that time, RIM's value has continued to decline. If the price dropped down to nothing, Amazon might have a reason to acquire the firm. But what would be the point? Amazon is more than capable of producing electronics all on its own. It doesn't need the help of a dying smartphone manufacturer.
Ultimately, one of my colleagues here at Benzinga believes that a mobile Chinese company will be most interested in acquiring RIM. But with the rise of Chinese smartphone producers (including Meizu, which has made an impressive iPhone clone), they don't really need RIM either.
Sadly, no one does -- least of all consumers.
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