Hugo Miller and Matt Walcoff Toronto
Research In Motion’s (RIM’s) decline below book value for the first time in nine years leaves the BlackBerry maker worth less than the net value of its property, patents and other assets in a sign of investors’ lowered faith.
“This is a wounded puppy,” said Solaris Group chief investment officer Timothy Ghriskey.
“They have been losing business, there have been operating technology problems. There isn’t a lot of customer loyalty anymore,” he said.
The firm helped create the smartphone market a decade ago with its first e-mail device and now it must compete with Apple and devices that run Google’s Android software.
The decline in market share has put pressure on RIM to shake up management, and investors such as Jaguar Financial have called for the Canadian firm to split up, seek a merger or sell itself.
“The market, at book value, seems to be saying not only is RIM going to not get bigger in the future, but it’s actually going to shrink,” Richard Fogler at Kingwest said.
He said he sold his RIM shares in the third quarter, adding “everyone’s frightened of what’s going to keep happening tomorrow”.
If a private equity investor were interested in buying RIM, book value would be a useful indicator to gauge the company’s worth if the buyer then sold the assets, said Avian Securities analyst Matt Thornton.
“It really comes into play for somebody looking for downside protection. If we liquidate or sell off the assets, what’s our downside protection, that’s when it becomes a more meaningful metric,” Thornton said, who rates RIM neutral.
Based in Waterloo, Ontario, the company’s US market share sank to 9.2 percent in the third quarter from 24 percent a year earlier as consumers opted for Apple’s iPhone and Android phones from Samsung Electronics and HTC, research firm Canalys said.
RIM posted its first quarterly revenue decline in nine years in September and is struggling to move its BlackBerry line-up onto a new operating system and reignite interest in its PlayBook tablet computer.
The PlayBook went on sale in April without dedicated e-mail, stirring criticism that RIM said it would remedy this summer. The company said last month that an e-mail software upgrade would not come until February.
“The market has no faith in its current model, that is what the market is telling you,” said Neeraj Monga, an analyst at Veritas Investment Research in Toronto.
Monga, who has a sell rating on RIM, said there was a 50 percent chance that the stock would drop below $10 within 12 months. It has dropped 67 percent this year, cutting RIM’s market value to $9.91 billion (R78.5bn).
RIM had a book value of $9.92bn on August 27, the end of its most recent quarter.
RIM fell 2 percent to $18.91 on Wednesday in New York.
Major investors who have sold all their shares in recent months include Brookside Capital Investors, Greystone Managed Investments, Janus Capital Management and Montrusco Bolton Investments, according to Bloomberg data. – Bloomberg