Blackberry maker, Research in Motion, falls yet another 19% on product delays

Research in Motion, maker of the Blackberry, fell 19% yesterday to finish the US session at a new 12 year low of $7.39 making its market capitalisation now less than $5 billion. The company has remaining cash of $2.2 billion. In 2008 the company was trading $150 and its 52 week high is $33. 

The reason? Yet another blunder in product development and awful set of quarterly results. After the close Thursday, the company reported revenue of $2.8 billion for the quarter ended June 2 and net loss of $518 million, or 99 cents a share. Adjusted for goodwill impairment, the company posted a loss of $192 million, or 37 cents a share. Analysts were expecting a loss of 1 cent a share on revenue of $3.1 billion.

The key reason for the drop was a significant delay in the launch of Blackberry 10 operating system platform, with the launch moving back from the Autumn of this year to Q1 2013, at the earliest. RIMM also announced 5000 job losses to try and stem the red ink. 

The new delay follows problems with network glitches and technical issues with new phones in 2011 and earlier in 2012. Since Thorsten Heins became CEO in February, he has had to deal with a real mess.

What next for Research in Motion? There is some debate here at Spreadbet Magazine about the merits of the company and I have been sceptical for some time about it given the highly competitive smart phone market and constant cock-ups. 

Cash is worth around $4 a share and the 11,000 patents the company has may be worth $5-6 a share.The company has around 14% of the global smartphone market or 78 million subscribers which produces revenues to the company of $1 billion per quarter and the company has a dedicated data network which is unique. RIM’s user base includes 56m BlackBerry Messenger users, who could be attractive to potential acquirers including rival mobile operating system.

So at $7 it looks like a solid base for the company, but whether it will be a break-up or turn around is the big question. Certainly with Iphone 5 around the corner and with the delays to the new Blackberry, it will be an uphill struggle. Will Samsung, Microsoft or even Google pounce? Like Nokia, a dominant position in the business focused mobile market, has been thrown away due to complacency, mismanagement and competitive pressure. 

Contrarian Investor UK