More turmoil this week from BlackBerry maker RIM (NSDQ: RIMM) that could not be mitigated by the news of the launch of a new distribution deal (the “4G” Torch 9810 on T-Mobile USA) or a new service (BBM Music now live). On the back of falling market share in some key regions, RIM’s declining stock price has some contemplating whether it should be broken up and sold in pieces.
Yesterday, RIM’s stock price ended at $18.91, putting the market capitalization of the company below that of its book price of $18.92 per share, as calculated by Bloomberg. The book price is the net value of the company’s patents, property and other assets minus liabilities. When a company’s market price falls below this value, it prompts people to look at whether it’s better to break up the business.
That’s an issue that some financial analysts are already starting to raise — although for now there seem to be some reservations behind the notion, as per Matt Thornton, an Avian Securities LLC analyst in Boston, who is quoted in the Bloomberg piece: “If we liquidate or sell off the assets, what’s our downside protection?”
RIM has certainly seen some big declines of late: it’s share of shipments (and handsets sold) in key markets like the U.S. has plunged in the last year. According to figures from Canalys out yesterday, the company made up nine percent of shipments in the last quarter, compared to 24 percent a year ago. That’s been somewhat offset by growth in Europe and Asia but overall the company still posted a revenue decline in its last earnings report in September — its first in nine years.
And that was before the company faced a huge data network outage in October. That will have potentially strong liabilities for the company, not just in terms of damaged reputation among consumers and enterprise users, but also in terms of compensation for lost service: enterprises would have had service level agreements in place, and there are some lawsuits now also brewing among consumers for the broken service. RIM has not publicly stated yet what the cost to the company might be overall.
This year, RIM’s stock price has already fallen by 67 percent and some speculate that it could go below $10 in the next 12 months.
As we have detailed in many past posts, the biggest problems for RIM right now are that it is working on legacy software and devices that are finding it hard to compete against the likes of Apple (NSDQ: AAPL) and Android makers in the smartphone market that is the cornerstone of its business. Its foray into tablets, meanwhile, has so far proven to be a sales disappointment.
It hasn’t helped, either, that there isn’t the greatest amount of faith left among many for the company’s longstanding arrangement of having two CEOs, Jim Balsillie and Mike Lazaridis, directing the company.
But could this really be the end for the company? In RIM’s defense, it is worth pointing out that the company has seen at least one dip like this before — back in 2002 — before then seeing its shares peak in 2007. And Nokia (NYSE: NOK) also saw its book value plunge back in August. It’s now trading at 1.4 times that value, according to Bloomberg.
The coming months — and especially the holiday buying season — will give us a clearer picture of whether this week is one of those “the only way is up” moments, or really just a stopover on the way further down.