Now that Research in Motion has hired bankers to evaluate strategic options, a sale of the company or significant restructuring of the BlackBerry maker appears to be a more plausible even likely outcome.
“Given our belief BB10 smartphones will struggle to gain traction in the highly competitive smartphone market, we believe RIM may eventually sell assets, sell the entire company, or materially change its business model to a smaller niche supplier,” Canaccord Genuity analysts T. Michael Walkley and Matthew D. Ramsay wrote Wednesday in a daily letter to investors.
RIM’s announcement this week that it anticipates an operating loss in the first quarter has further hurt the credibility of a company whose market valuation has deteriorated in the face of weak sales and a widely held view that BlackBerry has fallen behind innovators like its more successful rival Apple. The stock has plummeted an astonishing 93 percent since its peak in 2008, according to The Associated Press.
Speculation is rising over what RIM is actually worth and what components of its business remain attractive for potential suitors. Canaccord Genuity isn’t bullish on the consumer business.
“We believe RIM’s lower ARPU consumer subscriber base holds little value in an acquisition due to our belief this base is already at risk longer-term to competing smartphone ecosystems,” Walkley and Ramsay of Canaccord Genuity wrote. “In fact, with our checks indicating decelerating global sales of the 8520 and subsequently refreshed Curve models, we believe increasingly affordable Android smartphones and the new lower [priced] iPhone 3GS and iPhone 4 will slowly take over RIM’s consumer base longer term.”
The patents held by the company, however, are considered valuable. Christopher Marlett, the CEO of MDB Capital, told the AP RIM’s patents are valued at more than $1 billion. The patents could be worth as much as $4 billion if bidding wars develop between Apple, Google, Microsoft and possibly Samsung, he said. Last year, a consortium that included RIM outbid Google (by five times its bid) to purchase more than 6,000 patents and applications held by Nortel Networks for $4.5 billion.
Earlier this week, RIM announced retainers J.P. Morgan Securities LLC and RBC Capital Markets to assist with a strategic review of the company. The bankers are evaluating a variety of strategies, including “opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives,” according to RIM CEO Thorsten Heins in a statement.
A sale of the company is one of the scenarios that bankers are likely analyzing. “You don’t hire a banker unless you’re considering a sale,” the president of an investment management firm that doesn’t own RIM shares told Bloomberg.