philassor Posted December 21, 2011 Share Posted December 21, 2011 http://www.bloomberg.com/news/2011-12-20/research-in-motion-gains-on-report-saying-amazon-mulled-takeover.html Link to comment Share on other sites More sharing options...
Guest misterstockwell Posted December 21, 2011 Share Posted December 21, 2011 This would be a game changer for MSFT / NOK. It would put MSFT right back in the boardrooms on smart phones and tablets as gate keepers or toll bridges. More like in the hands of teenagers Link to comment Share on other sites More sharing options...
value-is-what-you-get Posted December 22, 2011 Share Posted December 22, 2011 From November financials, if we take total current assets only and subtract all liabilities short term, long term and debt - I get 6.41 per share. The first thing that occurs to me is how strange it is to be performing cigar butt calculations on RIM, and the secomd is that I can sell Jan 2013 $8 puts for 0.89 ea giving the option to buy RIM any time in the next year for7.15 more or less after costs. I ll wait for the next piece of bad news to bump up the premium. Thoughts? Link to comment Share on other sites More sharing options...
Uccmal Posted December 22, 2011 Share Posted December 22, 2011 From November financials, if we take total current assets only and subtract all liabilities short term, long term and debt - I get 6.41 per share. The first thing that occurs to me is how strange it is to be performing cigar butt calculations on RIM, and the secomd is that I can sell Jan 2013 $8 puts for 0.89 ea giving the option to buy RIM any time in the next year for7.15 more or less after costs. I ll wait for the next piece of bad news to bump up the premium. Thoughts? investors were doing this exact analysis at double the price. Tech stocks that blow up can go to $4.70 (see nokia). their business can "go away". Don't sell puts on Rimm, or any other volatile stock, for that matter, unless you really want to own it at your new low price. If you want 6% income try Bce, cfx, and collect the dividend. Rim's inability to market it's products, or leap frog it's competitors with QNX, could leave the stock in the low single digits, as Burke suggests. Link to comment Share on other sites More sharing options...
stahleyp Posted December 22, 2011 Share Posted December 22, 2011 Why does everyone think RIMM is gonna go out of business? They have a really strong balance sheet and while not as profitable as they once were, they are still making money. Link to comment Share on other sites More sharing options...
Uccmal Posted December 22, 2011 Share Posted December 22, 2011 I'll elaborate a bit. Rimm is looking a little like Dell now, with less consistent cash flow. Management will need to rebuild credibility going forward. The stock will remain moribund just like Dell, for years, even if things start to turn someday. There will be plenty of time to buy it next year, or the year after. Link to comment Share on other sites More sharing options...
Uccmal Posted December 22, 2011 Share Posted December 22, 2011 Why does everyone think RIMM is gonna go out of business? They have a really strong balance sheet and while not as profitable as they once were, they are still making money. I don't think their demise is imminent. Existing management has lost an enormous amount of credibility, with all the botch-ups and delays this year. It will take alot of time to recover. I used Dell as an example, because it shows how long a turnaround can take, even while core parts of the business are still profitable. DEll stock hasn't budged in years. Link to comment Share on other sites More sharing options...
DCG Posted December 22, 2011 Share Posted December 22, 2011 As I've said in here before, it's not that they can't turn the business around, it's that their management seems to have no idea how to do that. They haven't released a great product in years. Their current customer base seems to consist mostly of people who are afraid of having to learn a new operating system, people who are required to use their products by the company they work for, and people who live in countries that don't yet have a lot of other options. Link to comment Share on other sites More sharing options...
stahleyp Posted December 22, 2011 Share Posted December 22, 2011 Yeah, but Dell is in a slow growth industry - PCs. RIMM is one of the biggest growth industries in the world - smart phones. I don't have a smart phone and very few people in my family do. There is still a ton of growth ahead. Everyone wants an iPhone...right now. Apple's driving visionary is gone. Apple's market cap is basically only about $40 billion higher than MSFT and GOOG combined. Trees can't grow to the sky. I'd imagine Apple will slip up in the not too distant future. The technology field is crazy unpredictable. Super hard to value and predict. I never bought RIMM because I didn't see how they could over take Apple. However, I see that Apple is certainly vulnerable now and RIMM doesn't have to do a lot right to make someone a lot of money. As for disclosure, I do not own any RIMM but since this latest earnings miss, I have been taking some more time with it. According to this, RIMM is worth about $5-$8 billion for patents and Blackberry operations. "Shaw Wu, an analyst with Sterne Agee & Leach in San Francisco, estimates that RIM's patents are worth between $2.5 billion and $4 billion. He believes the core BlackBerry operations are probably worth about the same amount. That adds up to $5 billion to $8 billion, tops. RIM's market value is currently $7 billion." So, everything else is free? You have a company in a quick growing industry, is hated by just about everyone, high insider ownership, little in liabilities,$2 billion in cash, a lot of great managers buying (Watsa, Yacktman, guys from Primecap)...yeah, things could get worse, but the risk vs reward trade off is interesting to say the least. Link to comment Share on other sites More sharing options...
AZ_Value Posted December 22, 2011 Share Posted December 22, 2011 Yeah, but Dell is in a slow growth industry - PCs. RIMM is one of the biggest growth industries in the world - smart phones. You have a company in a quick growing industry To echo what Peter said earlier, how quickly was the cell phone industry growing when names like Ericsson or MOT stopped being relevant almost overnight? The technology field is crazy unpredictable. Super hard to value and predict. This is exactly the point. Can you say with any degree of certainty where RIMM will be 5 years from now, actually make that 3 years from now? I can't, so why gamble on a thesis that essentially boils down to whether or not management will suddenly have what it takes to catch up with competition and turn things around. This story just reminds us that it's a tough world out there, especially in the tech field. Competition is fierce and there are no points awarded for past glory, just ask Kodak. It is not easy for RIMM to dream up a device as good as the Iphone, if they could, I reckon they would have done it already. And the more they fall behind the harder the climb gets. This past week alone, I've had 4 of my friends make the switch to the Iphone, now these are younger Blackberry users who have been addicted to the BBM messenger service for years and years and had sworn to never leave the Blackberry team, but now you hear them say things like "Yeah, but you can use the WhatsApp app, it's exactly the same as BBM". Point being, like Peter said, when the floodgates open, a company can spiral down quite quickly in this industry, all it takes is for people to stop "liking" it. Link to comment Share on other sites More sharing options...
Uccmal Posted December 22, 2011 Share Posted December 22, 2011 Stahleyp, You need to look at android rather than appl to see Rimm's more dangerous competition. Apple has taken the position of premium brand, for now. IMHO, the risk/reward tradeoff will improve should they get their shit together. It will take a long time for the stock to turn after the business has turned. Management appears to have no direction and has certainly lost credibility completely. As per Watsa investment - ever heard of can west global, fibrek, torstar, Abitibi. Ffh works on the Templeton/Graham principle of 3/5 equity investments working out and the rest wiping out. The difference between the winners and losers averages to a 20% gain annualized. Right now, it is still a falling knife. Link to comment Share on other sites More sharing options...
stahleyp Posted December 22, 2011 Share Posted December 22, 2011 I appreciate your guys' insights. Here is how I'm looking at it. Investing is very much probability based. Just because a company is terrible, doesn't mean you can't make money on it...especially when it's dirt cheap. RIMM's patents are worth about $3 billion or so. It could be a bit more or a bit less. They company has $2 billion on it's balance sheet. To me, that says the bottom is about $5 billion market cap. So, it could drop another 30% or so and be worth liquidation value on very, very, very conservative basis. We are talking inventory, buildings, brands, future opportunities worth $0. Everyone, even former shareholders absolutely hate the stock. Just look at articles, this tread, youtube, etc. So, 30% downside vs a few hundred percent potential upside. They don't even have to be the number 1, 2 or 3 smart phone marker. They just have to not suck. The probability of success is certainly tilted towards an investors favor. Yeah, they could turn into the next Erricson, Motorola etc, etc. I don't believe any of those guys had a ton of upper management invested in the company or ran by the founders. These guys have a ton of reasons to turn things around. Link to comment Share on other sites More sharing options...
Liberty Posted December 22, 2011 Share Posted December 22, 2011 One thing I'd be careful about is valuing patents. Lately they've been worth a lot, but the pendulum could swing back after a while of everybody suing everybody else for frivolous things. There could be a detente between the big players, so to speak, which would make the market value of patents less than it is in today's seller's market. Link to comment Share on other sites More sharing options...
stahleyp Posted December 22, 2011 Share Posted December 22, 2011 Liberty, isn't it just as likely that patents could potentially increase in value? A growing smart phone population, means patents would be more valuable. Then again, as technology changes, patents could become worth less and less, too. Link to comment Share on other sites More sharing options...
Liberty Posted December 22, 2011 Share Posted December 22, 2011 That's entirely possible, but having followed this for a few years, it now seems like we are in the high part of the cycle. It could always go higher, but that's not as likely as if we were in the low part of the cycle. What it's likely to look like is that a few very big company will find that the costs, uncertainty, and tedium of patent wars is not worth whatever they stand to gain from suing others, so they'll pressure politicians for patent reform. There could also be some PR backlash; imagine if a company is successful in totally blocking a competing product, and consumer really want that product. This could be very damaging to a brand. And then there's also the 'mutually assured destruction' equilibrium that it looks like we might be reaching. Once most of the big players all have 10s of thousands of patents, a few more or less won't make a difference, so they won't be on the market to acquire as much. Google was a target because they're a much younger company with a less bureaucratic/patent-oriented culture, but now that they've acquired a zillion patents, things should start to stabilize once the current cases make their way through the courts. Link to comment Share on other sites More sharing options...
stahleyp Posted December 22, 2011 Share Posted December 22, 2011 Very valid points, Liberty. Thanks, man! Link to comment Share on other sites More sharing options...
oec2000 Posted December 22, 2011 Share Posted December 22, 2011 So, 30% downside vs a few hundred percent potential upside. They don't even have to be the number 1, 2 or 3 smart phone marker. They just have to not suck. The probability of success is certainly tilted towards an investors favor. Yeah, they could turn into the next Erricson, Motorola etc, etc. I don't believe any of those guys had a ton of upper management invested in the company or ran by the founders. These guys have a ton of reasons to turn things around. Is the few hundred per cent upside you hope for as visible as the upside on US financials, for e.g.? With RIM, it's really hard to handicap the upside potential given the highly dynamic nature of the industry. Who knows what Apple will have brought out by the time RIM sorts out their mess. The other question that bugs me because I cannot answer it with satisfaction is why are their sales in emerging markets so strong when they are doing so badly in the US? Is it only a matter of time before the iPhone/Android phenomena catch up with them in emerging markets? Even if we accept your upside/downside ratio, do you see the probabilities of either outcome as 50:50? The downside outcome seems much more probable than the upside one imo. Isn't this a seven foot hurdle that's not worth attempting? Link to comment Share on other sites More sharing options...
DCG Posted December 22, 2011 Share Posted December 22, 2011 I don't know anything about RIM's patents, but does anyone know whether Apple and Google/Android Manufacturers are currently licensing any patents from RIM? If not, it seems like those companies are doing fine without RIM's patents. Link to comment Share on other sites More sharing options...
stahleyp Posted December 22, 2011 Share Posted December 22, 2011 So, 30% downside vs a few hundred percent potential upside. They don't even have to be the number 1, 2 or 3 smart phone marker. They just have to not suck. The probability of success is certainly tilted towards an investors favor. Yeah, they could turn into the next Erricson, Motorola etc, etc. I don't believe any of those guys had a ton of upper management invested in the company or ran by the founders. These guys have a ton of reasons to turn things around. Is the few hundred per cent upside you hope for as visible as the upside on US financials, for e.g.? With RIM, it's really hard to handicap the upside potential given the highly dynamic nature of the industry. Who knows what Apple will have brought out by the time RIM sorts out their mess. The other question that bugs me because I cannot answer it with satisfaction is why are their sales in emerging markets so strong when they are doing so badly in the US? Is it only a matter of time before the iPhone/Android phenomena catch up with them in emerging markets? Even if we accept your upside/downside ratio, do you see the probabilities of either outcome as 50:50? The downside outcome seems much more probable than the upside one imo. Isn't this a seven foot hurdle that's not worth attempting? I think there is certainly for a ton of upside in financials. However, the downside potential is much, much worse. It's not improbable that many banks are worth $0 or close to it. I have some bank exposure, but it's fairly limited. Certainly a lot of great asymmetrical trades there, too. I think iPhone/Android may certainly catch up with RIMM regarding emerging markets. I'm not smart enough to know whether or not that might happen. I do know, though, that human psychology plays a big piece in valuations and probabilities. So, let's say there is only a 30% chance RIMM turns things around. .$9.8 (30% drop from current price) vs. let's say not even the year high at $40. .7 * $9.8 vs .3 * 40 = expected payoff of $6.86 + $12 = $18.86. At $40, we're not even talking about the good old days. We are looking at June of this year = post Playbook. That is about a 35% return on some pretty conservative figures. The thing is so cheap that even a not great outlook, ie not bankruptcy gives it tremendous potential. Even at a 20% chance, the expected payoff is still a return of about 13% Link to comment Share on other sites More sharing options...
Uccmal Posted December 23, 2011 Share Posted December 23, 2011 Paul, your numbers are all good and they are the same ones I crunched at $40, $30' and $20. At any of those prices Rimm was dirt cheap assuming a change of strategy and significant rebound in market share. Based on 2-3 year term contracts unless there is a large turn around in fortune, the subscriber base will start to shrink everywhere. When/if that happens the bottom is one or two billion for the carcus. Link to comment Share on other sites More sharing options...
stahleyp Posted December 27, 2011 Share Posted December 27, 2011 Paul, your numbers are all good and they are the same ones I crunched at $40, $30' and $20. At any of those prices Rimm was dirt cheap assuming a change of strategy and significant rebound in market share. Based on 2-3 year term contracts unless there is a large turn around in fortune, the subscriber base will start to shrink everywhere. When/if that happens the bottom is one or two billion for the carcus. Uccmal, thanks for your thoughts. The only real difference is now the price is a lot cheaper. The market is pricing in a pretty bad scenario. Anything other than a terrible situation (which it could very well be!) and this could take off. On a more cynical view, it seems that most of the pro RIMM guys on here are now out of it, too and that says it could be an opportunity. I've not yet pulled the trigger though. Link to comment Share on other sites More sharing options...
Myth465 Posted December 27, 2011 Share Posted December 27, 2011 stahleyp my guess is you and your money will soon be parted should you invest. This is barring a take over by NOK or MSFT..... Link to comment Share on other sites More sharing options...
stahleyp Posted December 27, 2011 Share Posted December 27, 2011 Myth, it won't be the first time and I'm sure it won't be the last. :P Link to comment Share on other sites More sharing options...
Uccmal Posted December 27, 2011 Share Posted December 27, 2011 Hi Paul, whether I was ever pro-rimm or not is debatable. Anyway, I am a value investor, and thought I saw value. That value has eroded since spring last year due to management missteps, and fiercer competition. I have learned a vast amount in the last few months from everyone on this thread, including those I have head butted with. I have opted to exit and wait and see. My feeling is that Rimm has value, and with proper execution, all is not lost. But I also think that the turnaround on the stock price will lag any turnaround in the business. So, I am figuring at least start of 2013 before anything is readily apparent. Samsung, Android, and to a lesser degree Apple, are the golden ones right now. The flip side is that BB still has it's loyalists. My wife's two nieces have the new BBs and one has the playbook which she tethers to her BB. They swear by them but then I live in the heart of BB loyalty country so that is probably not a good indicator. They get access to all over their social media stuff with no data fees incurred, beyond the subscription price. The new BB bold one of them had works as well as an IPhone, absent Siri. They are late teens early 20's and all their friends use BBs as well. As I said, I will wait and see and invest a couple of hours per week keeping up with Rimm's progress. Link to comment Share on other sites More sharing options...
stahleyp Posted December 27, 2011 Share Posted December 27, 2011 Uccmal, Thanks again for your insight. You know much, much more about the company than I do. Link to comment Share on other sites More sharing options...
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