Sell Research In Motion Before It's Too Late
It's just another gloomy day in Research In Motion's (NAS: RIMM) gradual descent into market indifference.
Barclays Capital's Jeff Kvaal became the latest analyst to talk down the BlackBerry maker this morning. Downgrading the battered smartphone maker at this juncture may seem like overkill, but lowering his price target on the stock from $40 to $23 is as sobering as it is overdue.
RIM isn't going anywhere on its own right now.
Bulls will argue that I'm not being fair. How can this possibly be the ceiling for a smartphone titan selling at just four times this year's projected profitability? Forget the stateside malaise. There are areas in Europe and Asia where the BlackBerry Bold 9900 is actually out of stock! Check out QNX, dude.
Here's the problem. Financial journalism hasn't always been kind to RIM during this demise, but the bearishness has been warranted. Who cares if RIM has 70 million accounts worldwide? Slowing unit shipments and fading market share tells anyone with a sense of inertia where this company is going.
It's going to get worse
RIM's global market share has fallen from 18.7% to 11.7% over the past year. Doing one thing right -- corporate email -- just isn't enough in a world where Apple (NAS: AAPL) and Google's (NAS: GOOG) Android sell Swiss army smartphones.
Consumers are choosing iOS and Android as their operating systems of choice, and companies are left with little choice but to play along. If there's any resistance from IT departments, nerd-approved Microsoft (NAS: MSFT) is finally starting to flood the market with new Windows Phone devices. The Samsung Focus S and Focus Flash were announced yesterday, joining the introduction of T-Mobile's HTC Radar 4G last week.
Microsoft is going to put up a good fight, already earmarking billions in its battle to regaining relevance in wireless. Android handsets and iPhones are only gaining in popularity. Something's got to give -- and it's going to be RIM.
Sell before it's too late
Selling the invisible is easier than buying the inevitable so it's in RIM's best financial interest to cash out now. Why wait for the off chance that its three better-financed rivals all slip?
Kvaal argues that delays in PlayBook 2.0 tablets and QNX phones are a problem. I suggest that it's actually an opportunity for RIM to punch out before it embarrasses itself again.
It takes two to tango, naturally. Microsoft has been a long-rumored suitor for RIM, but it just doesn't make sense now that it's throwing billions at Nokia (NYS: NOK) to champion Windows Phone. It's unclear if that also knocks out the Finnish handset maker from making a play for RIM.
Does this leave us with HTC and other Asian wireless handset makers as the only potential buyers? No. There are probably several private equity firms that would be willing to either attempt a turnaround or ride out the cash cow into the sunset at the right price.
However, the best deal to be had may come down to Dell (NAS: DELL) and Hewlett-Packard (NYS: HPQ) . HP blew it on the Palm acquisition, but it was simply aiming too small at the time. BlackBerry would actually look decent on the arm of Dell and HP, even as an aging trophy wife that's beyond her prime.
Dell and HP have struggled to matter in the "good-enough computing" revolution that has sparked a spike in tablets and smartphones at the expense of their flagship PCs. Under the right conditions, a deal would be accretive -- in the near term, at least -- to either meandering tech giant.
Time is ticking
What is RIM waiting for? Analysts already see a sharp drop in profitability on flat revenue growth this fiscal year (which ends in February). Wall Street keeps talking down RIM's price target and future earnings projections.
The best thing that RIM can do for today's shareholders is to let QNX, PlayBook 2.0, and BBM Music fail under someone else's watch.
RIM blew it by not punching out earlier. Even from its privileged seats, it couldn't see its irrelevance coming. It's time for the company to do the right thing and see if someone else can make BlackBerry magical again.
At the time this article was published The Motley Fool owns shares of Google, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Dell, Apple, and Google; and creating a bull call spread position in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for HP. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.