This Is, Suprisingly, A Logical Way Out For $RIMM
Oddly enough, after all of the fumbling around, the news broke yesterday that Amazon was looking at Research in Motion. What would this accomplish? Amazon could buy a handset maker, for cheap. It already has the obvious marketing platform to sell whatever to whoever. At this point, selling the handset business to Amazon makes sense, but only if done SOON. Market share of Blackberries is plummeting, and before the handset is entirely obsolete, RIMM needs to sell. Ask Palm what happens what happens when this occurs too late.
Sell the Enterprise Division
With the unwanted stepchild (Blackberry handsets) sold, the Enterprise division which includes the secure email network still favored by corporations can be sold to a company that is dedicated to business computing. Microsoft, Oracle, IBM, take your pick. Microsoft, in particular can attach this to its entrenched servers, and there it makes sense.
Patents? Auction.
The value investor crowd has speculated that the RIMM patent portfolio is valuable. This blog has been highly skeptical of this. That said, let the open market decide, and get a price. The worst that can happen is that the patent portfolio can be included in the sale of the Enterprise division.
A+B+C > 14? Probably, But Timing is Key
RIMM management has no time to lose. The reason? Market share falling, and corporate customers are exploring how to integrate iPhone into corporate networks. RIMM management cannot, by itself, stop the rot. This erosion is time dependent, so a split-up and a sale needs to happen, and the sooner the better for RIMM shareholders.
Disclaimer: After being short from the 30s, the author is the smallest long imaginable at 13/share.
Showing posts with label $RIMM. Show all posts
Showing posts with label $RIMM. Show all posts
Wednesday, December 21, 2011
Sunday, November 27, 2011
One Thing is (Almost) Certain: $RIMM is Doomed
Eurozone Fate Unknown, $RIMM's Fate All But Sealed Now
Even sell-side analysts have taken out their envelopes and started adding numbers like this blog has already done on October 18th here on this blog. Cash + enterprise/server services + patent portfolio + goodwill = terminal price. As fellow bears on $RIMM have pointed out more fluently than I: anytime a tech stock becomes a value stock, it's over. Friendly reminder: value investors buy at a discount, not a premium to net asset value.
From October 18th:
Breakup Evaluation
Again, the ltz vortex repeats its long-term view: single digits are in order as a terminal stock price. Cash is now down to $1.5/share. Patent portfolio? Again, Apple views its main competition as Samsung, as the two are in a bitter, and growing, battle in pretty much every jurisdiction on the planet. Apple and Samsung are fighting each other simply because $RIMM is not a relevant competitor. The Blackberry system outage has damaged its last remaining asset: diehards have stuck with Blackberry due to network security and exclusivity. Those features, along with RIMM's existence itself, must now be questioned. So unless a technology buyer appears to fuse the patent portfolio with one of its own, there is almost no chance of a bid. Time is running out, and management either needs to be replaced, or a further decline will be in order.
Technical Analysis "May" Help, Temporarily
Now, every chart on this stock is busted. There will be all sorts of different statistics that you can find/create. MACD, Bollinger Bands, EMA, SMA of every conceivable timeframe: you can see them all on www.freestockcharts.com for yourself. On a short term basis, it may/can work. Over the medium term? Nope.
Now that the M&A, activist shareholder rumors and hype have subsided, and the S&P has retreated, $RIMM has continued its excruciating decline to $16/share. Alexander Hamilton, soon you will be worth 1 share of $RIMM.
Even sell-side analysts have taken out their envelopes and started adding numbers like this blog has already done on October 18th here on this blog. Cash + enterprise/server services + patent portfolio + goodwill = terminal price. As fellow bears on $RIMM have pointed out more fluently than I: anytime a tech stock becomes a value stock, it's over. Friendly reminder: value investors buy at a discount, not a premium to net asset value.
From October 18th:
Breakup Evaluation
Again, the ltz vortex repeats its long-term view: single digits are in order as a terminal stock price. Cash is now down to $1.5/share. Patent portfolio? Again, Apple views its main competition as Samsung, as the two are in a bitter, and growing, battle in pretty much every jurisdiction on the planet. Apple and Samsung are fighting each other simply because $RIMM is not a relevant competitor. The Blackberry system outage has damaged its last remaining asset: diehards have stuck with Blackberry due to network security and exclusivity. Those features, along with RIMM's existence itself, must now be questioned. So unless a technology buyer appears to fuse the patent portfolio with one of its own, there is almost no chance of a bid. Time is running out, and management either needs to be replaced, or a further decline will be in order.
Technical Analysis "May" Help, Temporarily
Now, every chart on this stock is busted. There will be all sorts of different statistics that you can find/create. MACD, Bollinger Bands, EMA, SMA of every conceivable timeframe: you can see them all on www.freestockcharts.com for yourself. On a short term basis, it may/can work. Over the medium term? Nope.
Now that the M&A, activist shareholder rumors and hype have subsided, and the S&P has retreated, $RIMM has continued its excruciating decline to $16/share. Alexander Hamilton, soon you will be worth 1 share of $RIMM.
Monday, October 24, 2011
Netflix ($NFLX): Reed, NOW You Have Some Really Tough Questions to Answer
The Fundamental Problems Facing Netflix Are Known
In fact, this blog has listed many of them here. As a business model, Netflix controls few, if any, of the inputs that would determine its success or failure. That is a big problemo, but this blog has already pointed them out, before the warnings made by the company. It could be said, if you were a fan of management, that Netflix filled a void that existed between suppliers of content (studios) and delivery mechanisms (cable, tv, etc). No need to rehash that here.
Wasn't the Loss of Subcribers a Material Fact?
The troubling thing at this point, and perhaps most damaging, is the fact that management has held onto its business model for too long, without selling itself, and without putting itself in the monopolist position. Perhaps it could never put itself in the monopolist position in the US because the studios and the cable systems would never allow it. Fair enough.
However, given that the stock price was predicated on the growth of subscribers, and that Netflix would have had knowledge of the loss of subscribers, the fact that they have revealed this just now, without more clarity during the quarter is shocking, and will subject Netflix' management to class action lawsuits by investors who will claim, perhaps rightfully so, that Netflix management was negligent by not reporting an obviously material fact. This will weigh on the upside potential should a potential bidder emerge.
Who Would Buy Netflix? Ignore the Rumors
Much like $RIMM, there will be some speculation regarding Netflix as a takeover play. Unfortunately, given the fact that most of the weakness are known, and that those weaknesses are turning into a negative growth rate, enormous (insurmountable) barriers exist to repel any potential bidders. Just who would buy Netflix and why? Apple or Amazon could potentially buy, but to what end? Both have substantial cloud presences. Both have superior relationships with suppliers of media content. Maybe, one or the other would buy Netflix' portfolio of existing contracts to obtain exclusivity. Pixar has just signed with Netflix, and that could potentially be a jewel. The foreign expansion plans are still in their infancy, so that is still a wait-and-see proposition. In short, we are back to salvage value here: the value of the existing contracts could be sold to whom? A consortium made up of competitors? Unlikely. A buyer of existing subscriber base, who can change loyalties with a single click? Unlikely. This is probably not new news to Netflix' management, which has flip-flopped over the past couple of months over these problems. Unfortunately, the problems cannot be solved without selling itself to the highest remaining bidder, who would now face anger from existing shareholders. Still a sell. Even here.
In fact, this blog has listed many of them here. As a business model, Netflix controls few, if any, of the inputs that would determine its success or failure. That is a big problemo, but this blog has already pointed them out, before the warnings made by the company. It could be said, if you were a fan of management, that Netflix filled a void that existed between suppliers of content (studios) and delivery mechanisms (cable, tv, etc). No need to rehash that here.
Wasn't the Loss of Subcribers a Material Fact?
The troubling thing at this point, and perhaps most damaging, is the fact that management has held onto its business model for too long, without selling itself, and without putting itself in the monopolist position. Perhaps it could never put itself in the monopolist position in the US because the studios and the cable systems would never allow it. Fair enough.
However, given that the stock price was predicated on the growth of subscribers, and that Netflix would have had knowledge of the loss of subscribers, the fact that they have revealed this just now, without more clarity during the quarter is shocking, and will subject Netflix' management to class action lawsuits by investors who will claim, perhaps rightfully so, that Netflix management was negligent by not reporting an obviously material fact. This will weigh on the upside potential should a potential bidder emerge.
Who Would Buy Netflix? Ignore the Rumors
Much like $RIMM, there will be some speculation regarding Netflix as a takeover play. Unfortunately, given the fact that most of the weakness are known, and that those weaknesses are turning into a negative growth rate, enormous (insurmountable) barriers exist to repel any potential bidders. Just who would buy Netflix and why? Apple or Amazon could potentially buy, but to what end? Both have substantial cloud presences. Both have superior relationships with suppliers of media content. Maybe, one or the other would buy Netflix' portfolio of existing contracts to obtain exclusivity. Pixar has just signed with Netflix, and that could potentially be a jewel. The foreign expansion plans are still in their infancy, so that is still a wait-and-see proposition. In short, we are back to salvage value here: the value of the existing contracts could be sold to whom? A consortium made up of competitors? Unlikely. A buyer of existing subscriber base, who can change loyalties with a single click? Unlikely. This is probably not new news to Netflix' management, which has flip-flopped over the past couple of months over these problems. Unfortunately, the problems cannot be solved without selling itself to the highest remaining bidder, who would now face anger from existing shareholders. Still a sell. Even here.
Tuesday, October 18, 2011
RIMM: Breakdowns, Rumors, and Valuation ($RIMM)
The S&P Has Ripped Higher
Confidence in the eurozone "solutions" has led to euro strength vis-a-vis the US dollar, and the result has been a furious S&P 500 rally. Technology has led the charge, particularly in anticipation of Apple's earnings tonight. Earnings have done their thing, i.e. outperforming by a little, with cautious outlooks. It wouldn't take a crystal ball to predict this, as long as you believe that eurozone governments will attempt to kick the can, and hard, down the road.
RIMM Is Getting Hit on All Sides
The news for RIMM couldn't really get much worse, for now. First, Apple's 4S seems to be an enormous success, with 4 million units sold over its opening weekend. Second, Blackberry service has been interrupted, which prompted management to both apologize publicly, and offer $100 of free applications to users as compensation. Third, Carl Icahn stated on CNBC that RIMM was "not on the radar," thereby defusing buyout hopes.
That Said, $RIMM Has Been Resilient
What is most interesting is that $RIMM the stock has not really gone down very much. Now, there can be no doubt that much of this is due to the fact that the market, as a whole, has rallied more than 10% from the intraday lows earlier this month. At this point, the resilience must be respected, since it is clear that long-term holders have not entirely thrown in the towel. That said, the fundamentals of the above paragraph continue to apply, and note that $RIMM was very careful to not offer cash, and the reason is simple: it is running out of cash, as evidenced by last quarter's earnings report.
Breakup Evaluation
Again, the ltz vortex repeats its long-term view: single digits are in order as a terminal stock price. Cash is now down to $1.5/share. Patent portfolio? Again, Apple views its main competition as Samsung, as the two are in a bitter, and growing, battle in pretty much every jurisdiction on the planet. Apple and Samsung are fighting each other simply because $RIMM is not a relevant competitor. The Blackberry system outage has damaged its last remaining asset: diehards have stuck with Blackberry due to network security and exclusivity. Those features, along with RIMM's existence itself, must now be questioned. So unless a technology buyer appears to fuse the patent portfolio with one of its own, there is almost no chance of a bid. Time is running out, and management either needs to be replaced, or a further decline will be in order.
Confidence in the eurozone "solutions" has led to euro strength vis-a-vis the US dollar, and the result has been a furious S&P 500 rally. Technology has led the charge, particularly in anticipation of Apple's earnings tonight. Earnings have done their thing, i.e. outperforming by a little, with cautious outlooks. It wouldn't take a crystal ball to predict this, as long as you believe that eurozone governments will attempt to kick the can, and hard, down the road.
RIMM Is Getting Hit on All Sides
The news for RIMM couldn't really get much worse, for now. First, Apple's 4S seems to be an enormous success, with 4 million units sold over its opening weekend. Second, Blackberry service has been interrupted, which prompted management to both apologize publicly, and offer $100 of free applications to users as compensation. Third, Carl Icahn stated on CNBC that RIMM was "not on the radar," thereby defusing buyout hopes.
That Said, $RIMM Has Been Resilient
What is most interesting is that $RIMM the stock has not really gone down very much. Now, there can be no doubt that much of this is due to the fact that the market, as a whole, has rallied more than 10% from the intraday lows earlier this month. At this point, the resilience must be respected, since it is clear that long-term holders have not entirely thrown in the towel. That said, the fundamentals of the above paragraph continue to apply, and note that $RIMM was very careful to not offer cash, and the reason is simple: it is running out of cash, as evidenced by last quarter's earnings report.
Breakup Evaluation
Again, the ltz vortex repeats its long-term view: single digits are in order as a terminal stock price. Cash is now down to $1.5/share. Patent portfolio? Again, Apple views its main competition as Samsung, as the two are in a bitter, and growing, battle in pretty much every jurisdiction on the planet. Apple and Samsung are fighting each other simply because $RIMM is not a relevant competitor. The Blackberry system outage has damaged its last remaining asset: diehards have stuck with Blackberry due to network security and exclusivity. Those features, along with RIMM's existence itself, must now be questioned. So unless a technology buyer appears to fuse the patent portfolio with one of its own, there is almost no chance of a bid. Time is running out, and management either needs to be replaced, or a further decline will be in order.
Friday, September 16, 2011
Netflix or RIMM: Which is Worse? Its Close
Comparing Netflix ($NFLX) to Research in Motion ($RIMM) Isn't Quite Right
Both stocks had very bad days yestereday. Netlfix' bad day started before the market opened and Research in Motion's bad day started after the market closed. However, that is where the similarities end.
Netflix' troubles have been highlighted here.
Netflix Has a Brand Name, Research in Motion Doesn't
There is hope for Netflix at some level, i.e. it can still form partnerships with media companies in exchange for equity. It can try to secure licensing agreements for content in international markets (unlikely, since the blueprint already exists). In other words, Netflix has a brand name which needs to be levered into returns for equity holders. Fast.
Research in Motion, however, is in a huge amount of trouble. It is rapidly becoming irrelevant in the smartphone market, as it gets dominated by Android phones and of course, the iPhone. Enterprise email/server infrastructure? Being bypassed although it will be a while for the largest companies to entirely shift this infrastructure away from Blackberry due to security issues. If this gets moved to the cloud in a viable way, it will mean the death knell for RIMM.
Worse: RIMM is Running Outta Cash
It has been widely publicized that the RIMM tablet is a disaster, and that the marketshare of RIMM's smartphones is dropping. Perhaps most telling is the fact that RIMM itself used 50% of its cash in the last quarter, including something like $750 million on Nortel's patents. The return on those bids better come quickly, because management has lost the faith of the investing community.
RIMM's backers suggest that the enterprise franchise and patents make RIMM a value play. Granted, the enterprise franchise could be worthwhile but the problem is that users don't want to use Blackberrys, other than the 60 year olds who have been using them for 10 years.
Patents is another matter. People mistakenly believe that these are very valuable. Well, lets like the courts decide. Has Apple launched lawsuit after lawsuit attempting to block the sale of the Playbook? No. Apple has its sights set on the Samsung Galaxy Tab. Apple knows that Samsung is Apple's only viable competitor, with not only design but production capabilities as well. RIMM? Not worth of Apple's attention. That is all you need to know about the value of RIMM's intellectual property.
Correction: Netflix and RIMM Do Have Something in Common
Both are sells, and while you can daytrade or do whatever you would like in the very short term, and will remain so until any of the facts above are proven to be wrong. VWAP, EMA, SMA, Bollinger, MACD: all of them will merely be numbers that get sliced through unless something dramatic occurs, and soon.
Both stocks had very bad days yestereday. Netlfix' bad day started before the market opened and Research in Motion's bad day started after the market closed. However, that is where the similarities end.
Netflix' troubles have been highlighted here.
Netflix Has a Brand Name, Research in Motion Doesn't
There is hope for Netflix at some level, i.e. it can still form partnerships with media companies in exchange for equity. It can try to secure licensing agreements for content in international markets (unlikely, since the blueprint already exists). In other words, Netflix has a brand name which needs to be levered into returns for equity holders. Fast.
Research in Motion, however, is in a huge amount of trouble. It is rapidly becoming irrelevant in the smartphone market, as it gets dominated by Android phones and of course, the iPhone. Enterprise email/server infrastructure? Being bypassed although it will be a while for the largest companies to entirely shift this infrastructure away from Blackberry due to security issues. If this gets moved to the cloud in a viable way, it will mean the death knell for RIMM.
Worse: RIMM is Running Outta Cash
It has been widely publicized that the RIMM tablet is a disaster, and that the marketshare of RIMM's smartphones is dropping. Perhaps most telling is the fact that RIMM itself used 50% of its cash in the last quarter, including something like $750 million on Nortel's patents. The return on those bids better come quickly, because management has lost the faith of the investing community.
RIMM's backers suggest that the enterprise franchise and patents make RIMM a value play. Granted, the enterprise franchise could be worthwhile but the problem is that users don't want to use Blackberrys, other than the 60 year olds who have been using them for 10 years.
Patents is another matter. People mistakenly believe that these are very valuable. Well, lets like the courts decide. Has Apple launched lawsuit after lawsuit attempting to block the sale of the Playbook? No. Apple has its sights set on the Samsung Galaxy Tab. Apple knows that Samsung is Apple's only viable competitor, with not only design but production capabilities as well. RIMM? Not worth of Apple's attention. That is all you need to know about the value of RIMM's intellectual property.
Correction: Netflix and RIMM Do Have Something in Common
Both are sells, and while you can daytrade or do whatever you would like in the very short term, and will remain so until any of the facts above are proven to be wrong. VWAP, EMA, SMA, Bollinger, MACD: all of them will merely be numbers that get sliced through unless something dramatic occurs, and soon.
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