RIM Falls 9.5% On Rumors Of Fewer Exit Options

Research in Motion’s (NASDAQ:RIMM) shares fell almost 10% in trading Tuesday as speculations about a lack of interest from potential bidders made the rounds. During the last week’s earnings call, new RIM CEO, Thorstein Heins, showed more willingness than his predecessors to address shareholder’s concerns, raising the hopes of a stock sale and sending the stock up more than 7% the following day. All those gains and more were wiped out yesterday as analysts poured in on concerns that there may not be many buyers left in the market for the Blackberry’s declining business. ^[1]

See our complete analysis for RIM stock here

Stock is cheap, but could get even cheaper

Tuesday’s fall brings the company’s market capitalization down to $6.8 billion, which is an almost 32% discount to the book value of its net assets. According to the company’s most recent Q3 FY 2012 filings, its total assets, net of liabilities, stood at almost 10.2 billion, about 15% of which is hard cash. So, the valuations do look attractive for a company looking to acquire RIM but RIM’s recent failures from an innovation standpoint on both the smartphone and tablet fronts imply that there could be more pain in store for the fragile stock with a couple of difficult quarters ahead, at the very least. (see Heins Finally Lays Out A Plan For RIM, But Maybe Too Late)

Companies such as Amazon, which could be interested in RIM’s tablet and OS, and Samsung, which might be looking at RIM’s network infrastructure for email and messaging, could therefore choose to wait it out and see if they can get parts of RIM’s businesses at cheaper valuations. Moreover, RIM doesn’t seem to be going all out for sell-out options. During the earnings call, Heins stressed that although he is open to the idea of a sale, that is not the “main direction” for the company. So, unless someone comes and makes a really aggressive bid for the company, a la Google, it doesn’t look like RIM is going to be sold any time soon.

So, there are two ways this could end for RIM here. Either RIM gets its hopes down and accepts a lower bid, or someone finds enough value on the company to offer a very aggressive bid. Of course, there is the third one – Heins’ strategic plans for RIM work out, the Blackberry 10 smartphones are released in time and they somehow perform better than anticipated. But no one seems to be betting on that right now.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. RIM Falls 9.5% on Speculation Buyers Dropping Off: Toronto Mover, Bloomberg, April 4th, 2012 [↩]