The end of RIM: How BlackBerry crumbled

The company has essentially served formal notice to its shareholders that it can't complete a strategic turnaround on its own.

By The Fiscal Times May 30, 2012 12:52PM
By Suzanne McGee The Fiscal Times

This is what a company circling the drain looks like: Research In Motion (RIMM) has officially hired JP Morgan (JPM) Securities and RBC Capital to advise it on its previously announced "strategic review" of its business.

CEO Thorsten Heins described the role of these advisers in a jargon-laden statement Tuesday as evaluating "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." Translation? RIM is in dire straits and may end up selling part of the business.
 
That would be a depressing conclusion to RIM's saga, which saw a tiny Canadian startup become an icon of the Internet age; its Blackberry devices were so ubiquitous that they were dubbed "Crackberries." In the pre-Twitter era, one BlackBerry owner gave the world a taste of what was to come when he carried his device into the delivery room when his pregnant wife was about to give birth, and sent out e-mail updates every few minutes. In the year or two after the 1999 launch of the BlackBerry, long before the advent of the smartphones, possession of the device was a hallmark of status within the corporate world. And the BlackBerry network was secure enough for government use.
 
But as email has given way to texts and tweets, so the BlackBerry lost that cachet -- or rather, it forfeited it to the iPhone, Android phones and tablets. After all, the Blackberry wasn’t a multipurpose device of the same scope as a smartphone. You couldn't use it to read a book, watch a movie or play "Angry Birds."
 
And as with so many other once-pioneering technology firms, RIM failed to anticipate the advent of Apple's (AAPL) iPad and, once the latter was launched, failed to respond promptly enough with a competitive product. By the time it introduced its PlayBook tablet to the market a year ago, it was too little, too late; reviews were underwhelming and sales ho-hum, at best.

Within months, signs of distress at RIM were evident, as the company axed more than 10% of its workforce. A massive outage last October was simply the icing on the cake for many BlackBerry customers; RIM's new smartphones weren't fashion-forward enough to compensate for being without service. Its market share has plunged from more than 40% to about 10% of all smartphones, by some calculations. Last year, it took a big writedown on the value of unsold PlayBooks; it wrote down the value of a large stockpile of unsold BlackBerry devices last quarter.
 
Admittedly, the release issued Tuesday -- which also included a warning that the company expects to report an operating loss for its current fiscal quarter -- didn't state specifically that RIM, with its vast portfolio of alluring patents, is up for sale. But that's the gist of the company's pronouncement: It has served formal notice to its shareholders that it can't complete a strategic turnaround on its own. The declaration that RIM has hired bankers is a de facto invitation for interested bidders to step forward. Once bids -- solicited or unsolicited -- are made to the board, it will be hard for directors to argue that shareholders should reject them. What’s the alternative scenario? What other option can they point to?
 
So what lies ahead for RIM? Odds are that it's the patents, rather than the company's operations, that will be of most interest to any bidders. The company's market capitalization stands at about $6 billion; last summer, analysts at investment bank Jefferies & Co. calculated the company had invested about $5 billion in patents that might fetch at least double that if a bidder like Apple saw an opportunity to pick them up cheaply, or quadruple that in a competitive bidding situation or one where a company decides to fork over the same kind of premium that Google (GOOG) did when it agreed to acquire Motorola Mobility last year for $12.5 billion.
 
RIM's slow progress toward the brink of disaster is yet another reminder that the pace of technological change leaves no room for sentiment. Sony's (SNE) iconic Walkman of the 1980s was replaced by the Discman, as compact discs replaced LPs and cassette tapes; the advent of downloadable digital audio quickly banished both to the same realm inhabited by the 8-track music tape player, video cassette recorders and rotary dial telephones. There is no reason why the BlackBerry, long since displaced by the iPhone and other smartphones, shouldn't join them in oblivion given RIM’s unsuccessful struggle to win back its status as an industry pioneer.
 
In after-hours trading Wednesday, RIM’s shares dropped 7%; those losses have grown larger Wednesday. True, the company trades at a mere 5.2 times its trailing 12-month earnings, but for investors to see it as a deep value buy, they have to be convinced that there is some value in the company itself, and not just its patent portfolio.

Suzanne McGee is a columnist at The Fiscal Times. Subscribe to The Fiscal Times' free newsletter.

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20Comments
May 30, 2012 3:41PM
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Vanity sells, and BlackBerry has not kept up with that game.  Learn from the Samsung Galaxy or the Apple iPhone.  It's shiny, sleek, thin, touch screen, robust, browser friendly. Blackberry, dud, brick, behind, last decade, dull.  Get vain and it will sell.
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I'm sure they gave the CEO and all the other officers a big bonus, not sure why, but I'm sure they siphoned off a hundred million or so, because they did such a great job driving RIM into the ground.
May 31, 2012 5:32AM
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It's really too bad. I worked call phone tech support for 10 years, and I could gush about Blackberries and how cool they were for hours.

Those phones could take a beating (one client ran over it with his car, another accidentally put it through the washing machine - both worked just fine after), were SUPER secure (iPhones and Android have terrible security), had the most stable OS I've seen on any phone. If it was stolen, all it took was a call to the cell carrier, and we could initiate a remote wipe to nuke all the data on it. If something glitched on it, then pull the battery, wait 30 seconds, slap it back in and issue was solved 85% of the time. It made an excellent improvised modem, and the desktop software  was a very easy way to make sure your data was backed up.

But, like many, I switched to Android because Blackberry wasn't keeping up. Their web browser is stuck in 2003, and won't render many sites. The font is painfully small to read. I'm not a big fan of apps, but even the few I liked to use (such as a trip planner used by city transit) weren't compatible with the Blackberry. I still miss the stability and security, but Blackberry made the mistake Palm did and didn't keep up with what people use smartphones to do.
May 31, 2012 12:33PM
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I love my Blackberry and will keep it till the bitter end. I have tried the iphones and hate the way i have to type my emails one letter at at time, not so with my blackberry, i can type with my thumbs 2x faster than with the touch screens, the damn things grab the wrong letters no matter what, makes my emails nonsense. Like i said diehard blackberry fan to the bitter end!!!

May 30, 2012 4:26PM
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You reinvent yourself every five years or die in the latest data fad race. The market is more like rock star fads amount the youth. You burn up like a shooting star, and then you are gone.
May 31, 2012 10:21AM
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I've had multiple BlackBerries and have loved them!  I eventually had to go to the Android Phone but still miss my BB. Sad...sad...sad...sad to see them go down the drain. 
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I'd like to see microsoft pick this up.  The combination of the secure network and the windows phone would be nice. With Microsoft's tech the blackberry would be a good competitor for the iphone.
May 31, 2012 12:42PM
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We all knew it would happen.  Don't worry the iphone will have its fall some time soon.  That is just the way of digital technology.
May 31, 2012 10:20AM
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I love my blackberry phone.    I love the fact that I can program it to turn on in the morning and shut off at night.   I love the fact that I don't need to rub my finger across the screen to answer a call.......the other phones are so ignoring to deal with.    And yes, I did try the Droid.....hated it....went back to my blackberry.

 

May 30, 2012 7:21PM
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I have used a blackberry for a long time. But  even if they find a way out i would not buy another one. The first time i heard the name JPmorgan, i'm done.
May 31, 2012 8:36AM
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I'm in IT, after working with Blackberries since they came out I can't wait for them to die.  Their method of sending and receiving email is so archaic compared to every other smartphone.  FYI if your email server is setup properly it is every bit as secure as Blackberry.

May 31, 2012 1:24PM
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I liked blackberry in the beginning but as time went on I began to regret getting one, I have a IPhone now and prefer it much better...But eventually something better will come out to dethrone the IPhone too all in the way of moving forward with our technology.
May 31, 2012 7:05PM
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I've been a BlackBerry user for the longest time, like, since BlackBerries had track wheels. I've never really been a fan of touch screen smart phones, I mean, iPhones are pretty bitchin' phones, and sure, so are some of the Androids, but  personally, I've always had to have my qwerty keyboard there so my thumbs can text or send email after email at a thousand miles a minute. BlackBerry Bold 9900 user here, and I ****ing love my phone. BlackBerry fan for life!!

May 31, 2012 6:54PM
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Another example of fat, overpaid executive management out of touch with the market and too worried about quarterly bonuses while the ride lasted to have an intelligent business strategy that would evolve with changes in consumer preferences.

How interesting that the article touches on numerous facets of what is wrong with the company but is silent on the contributory negligence of its leadership over the last 5 years.

May 31, 2012 2:04PM
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If Blackberry can't get with the times and use Activesync instead of their crappy Blackberry server app or relay through your provider's server they deserve to go out of business.

Jun 13, 2012 8:47AM
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I have the Samsung Galaxy Note.  I know it is the best phone out on the market today.  I love it and couldn't function without it on a daily basis.  For all you IPhone users make the change.  You can do so much more with a Galaxy than you can with your IPhone.

Take the plunge into the newest techno smart phone out there.
May 31, 2012 6:32AM
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  It all comes down to one thing...are you tired of the rich getting all the bailouts and us working men getting nothing? Take a look at what I found and see why the rich are trying to hide this for themselves. G00GLE the term ' FAST STOCK BUDGET ' and click the first site. Go right to the 'PENNY STOCK' page to see what the rich don't want you to know. It is time your family lives the good life and this will help. THIS IS AMAZING!!! THIS IS A MUSSSST SEEE!!!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

washing machine - both worked just fine after), were SUPER secure (iPhones and Android have terrible security), had the most stable OS I've seen on any phone. If it was stolen, all it took was a call to the cell carrier, and we could initiate a remote wipe to nuke all the data on it. If something glitched on it, then pull the battery, wait 30 seconds

 

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