Research in Motion is the worst stock recommendation I have ever made. The company introduced one of the greatest technological devices ever invented, yet it squandered its market-leading position and it is now in danger of going out of business. Its demise is due almost entirely to mismanagement. RIMM was previously run by co-CEOs, a management structure that was doomed for failure. And while Apple and Samsung came out with generation after generation of new devices that wowed consumers, RIMM kept promising that it was working on something big. That promise is now ringing hollow.
Yesterday's (lack of) earnings announcement was extremely disconcerting. Revenues for the first quarter of fiscal 2013 plunged to $2.81 billion from $4.19 billion in the previous quarter. The company reported a net loss of $518 million or 99 cents per share. However, believe it or not, the subscriber base actually increased marginally and cash, cash equivalents, short-term, and long-term investments increased by more than $100 million during the quarter to $2.25 billion. That comes out to almost $4.30 per share.
RIMM is banking its future on the BlackBerry 10. Management said yesterday that this new platform will be available during the first calendar quarter of 2013. This announcement is being interrupted as a delay. After all, the company previously said that the BlackBerry 10 would be launched during the second half of fiscal 2013. The more important concern is whether the BlackBerry 10 will live up to expectations and, even if it does, will that make a difference. RIMM has demonstrated the device to developers, many of which were duly impressed; however, even if the BlackBerry 10 blows the iPhone out of the water, it may be too late to save the company.
It is becoming increasingly clear that RIMM's best chance for survival depends on it being acquired. In the past, the company turned down a number of offers. This time, it is actively seeking strategic alternatives. I would think that there are a number of companies that would be interested in getting access to RIMM's patents, international distribution channel, and its secure network. As always, it's just a matter of price. Given the company's cash horde and lack of debt, a 35% premium to the current market price would cost a potential acquirer only about $6 per share out of pocket.