To complete its vision, RIM should go private
For the last few months, North American business news channels have been buzzing with rumors declaring that an acquisition of Research In Motion is just around the corner. The list of potential suitors allegedly includes such technology heavyweights as Microsoft, Nokia and Samsung, though none of these options offers the prospect of an easy post-acquisition reorganization or integration of product/service portfolios.
While the rampant speculation has provided RIM’s beleaguered stock with a nice short-term upswing, none of this serves to solve the company’s struggles to execute on its plans to update its entire product line and introduce BlackBerry 10, the company’s great hope for the future.
With recent announcements from RIM suggesting that new BB 10 devices will not reach the market until late 2012 due to a short supply of semiconductor components, the outlook for the company’s performance this year has become positively glum. In the face of this turmoil, RIM has undertaken significant cost cutting through massive layoffs and is also engaged in substantial reorganization efforts, neither of which will provide an immediate correction for its existing difficulties.
So, unless RIM’s executive leadership is willing to entertain selling to the highest bidder and relinquishing control of their pride and joy, the company’s leaders have one option to wrest control of their company’s failing position with Wall Street and set their future course as they see fit: piece together a group of trusted investors and take RIM private.
Why go private now? There is no better time than the present from a cost perspective. With its current market capitalization hovering below $9bn, RIM’s value has reached its lowest point since 2004, when the company was still redefining mobile email, enterprise mobility and smartphone design. Even with acquisition rumors providing temporary upswings in the stock value, the overall downward trend in RIM stock remains doggedly persistent.
Despite the fact that RIM continues to be among the more profitable firms in the space, several PR missteps and strained relationships with key financial analysts have resulted in a swiftly declining stock price that shows little hope of rebounding in the next few quarters. Sure, RIM has been rebuilding its marketing and investor relations teams, but until the company is prepared to launch an innovative product portfolio around a fully functional and well realized BB10 operating system, the Street will continue its brutal treatment of the company’s stock. So, in the face of near certain gloominess, why bother being a publicly traded company with a Street that shows little to no faith in the company’s leadership? Given the recent price target downgrades, RIM will likely never be better positioned to buy back the company than right now.
If RIM’s co-CEOs are serious about their vision of a unified OS platform and device innovation and are committed to making it work, they should put together a group of private investors who are capable and willing to think in time horizons that stretch beyond the current quarter and take the company private again.
In the best of times, the benefits of being a publicly held corporation provide outstanding capital for investments and stock valuations that can dazzle even the most jaded of CEOs. But the salad days for RIM’s stock are over for the foreseeable future and the Street’s impatience with RIM’s strategy has created an atmosphere in which co-CEOs Mike Lazaridis and Jim Balsillie are being challenged at every level, including their participation in the board of directors. Certainly, stockholders have every right to be concerned about the company’s recent string of product difficulties, slow innovation cycle and product launch delays.
But in consideration of RIM’s larger strategic challenges, constant skirmishes with financial analysts and stockholders can easily become a festering wound, distracting the company from its more urgent tasks of executing on its plans. Instead of following a path of little to no return, RIM can and should choose to see its current financial position as an opportunity to up the ante, buy back the company and remove the very real distractions and challenges posed by the financial community as it charges ahead with its product strategy.