RIM Apologizes, Offers Cash but Fails to Appease Mr. Market

Research in Motion’s (NASDAQ:RIMM) shares have fallen by 10% the last two days in spite of a public apology by the company’s CEO followed by an offer of $100 worth of free apps to all BlackBerry users. ^[1] RIM is also offering all businesses that use the gadget with one month of free technical support as a show of gratitude for their patience during the recent service outage. With this fall, RIM has dropped by over 60% in the last one year.

It is tough to estimate how much the free offers will cost RIM but the financial impact could be significant if a sizable number of its 70 million subscribers choose to download the apps. At a time when shareholders are already trying to unseat a stubborn management group in the hopes of a takeover offer or an asset sale, the prolonged service outages have further hurt investor sentiment and hopes of a turnaround seem even remote now. We have discussed this in a previous note titled RIM’s BlackBerry Service Disruptions a Blow to its Turnaround.

Starting today, RIM is holding its annual three-day Blackberry DevCon Conference for software developers where it will try to persuade developers to build apps for its new QNX platform. ^[2] In order to assure the markets of the management’s focus, the company will have to come out with a strong long-term outlook on its operating system, QNX and give more clarity on the launch dates of its next generation devices.

Our $26 price estimate for RIM’s stock is about 17% above the current market price.

See our complete analysis for RIM stock here

1. RIM apologizes for BlackBerry downtime with $100 worth of free apps, AppleInsider, October 17th, 2011 [↩]
2. RIM to Host BlackBerry DevCon Americas 2011, RIM Press release, Oct 3rd, 2011 [↩]