As 2011 mercifully winds down for Research In Motion Ltd., RIM-T investor and analyst sentiment about the company’s future has degenerated from pessimistic to downright existential.
This week, the BlackBerry maker’s outlook became even more difficult to decipher, as the stock price jumped on rumours that activist investor Carl Icahn had taken an interest – and a substantial ownership stake – in the company. Three days later, the stock had given back the rumour-inspired gains, and was back near its lowest point since 2005. Meanwhile, an exodus continues out of the company’s senior ranks. This week’s departure was RIM’s head of developer relations, Tyler Lessard, who joins a list that includes two senior marketing chiefs and the man who led the effort on the PlayBook tablet.
With so much turmoil at the company, investors are trying to gauge the prospects for a shakeup. Here are four pressing questions about Canada’s most important technology firm:
What would an activist investor want?
Mr. Icahn is well-known for picking beleaguered companies, including those in the technology industry, such as RIM competitor Motorola, and trying to extract value from them. Besides the possibility of trying to find a buyer for the company, Mr. Icahn and other activist investors could push for changes on the company’s board of directors. (A Canadian money-management firm, Northwest & Ethical Investments LP, made a proposal to change RIM’s board structure this summer. As a compromise, the company has established a task force to study the issue and report back early next year.)
Any changes at the board would likely have the effect of taking some control away from RIM’s co-CEOs, Mike Lazaridis and Jim Balsillie, who currently also serve as co-chairs.
An activist shareholder could also push directly for management change, something several RIM critics have called for as the company’s market share has dropped this year. The co-CEOs will likely fight such pressure.
Activist investors also have other avenues when it comes to trying to boost RIM’s stock price. Earlier this year, RBC analyst Mike Abramsky floated the idea of breaking the company in two, arguing that “splitting RIM into network and handset businesses may target opportunities and unlock significant shareholder value.” That’s a direction Mr. Icahn could choose to pursue: he was instrumental in pushing Motorola to split into two last year.
Is RIM an acquisition target?
Rumours of RIM’s acquisition by a global tech giant have been around for years. But they grew deafening this summer after Google bid $12.5-billion (U.S.) for Motorola Mobility. The move was widely seen as a play for Motorola’s massive patent portfolio, leaving observers to wonder whether someone might go after RIM for the same reason.
However, there are plenty of hurdles. For one thing, even with RIM’s sagging stock price, a purchase bid could still run anywhere from $14-billion to $20-billion, which would be a huge investment, even though many tech companies are currently flush with cash. In addition, Microsoft Corp., the company seen by many as RIM’s most likely acquirer, has bet billions on a partnership with Nokia, and may well move to turn that partnership into an acquisition, rather than place a different bet on RIM.
A potential buyer would also almost certainly have to jump through numerous regulatory hoops. Following Nortel’s implosion, RIM stands as Canada’s brightest technology star, and the centre of the country’s drive for more innovation. Since all of its potential suitors are foreign, Ottawa will ask a lot of questions about any potential bid, and would have the right to review any deal under the Investment Canada Act.
Where will the next big jolt to the stock price come from?
