With Research in Motion's shares plummeting in the aftermath of a disastrous quarter, you have to wonder at what price the stock will encroach on RIM"s baseline value.
In a worst-case scenario, in which you write off the North American handsets business because it's deteriorating so quickly, and you give the company very little credit for its international operations because you've lost all confidence -- especially after the company said next quarter will be dismal again -- you can be optimistic about two key things: RIM's cash position, and its patent portfolio.
Valuing the cash and short-term investments is easy because they're spelled out in the financial statements, amounting to $2.2-billion (U.S.). Divide that by the number of shares outstanding and you get about $4.20 per share.
The patents are a completely different story. No one knows what they're worth. Last year analyst Kris Thompson at National Bank Financial noted that "the valuation of RIM's intellectual property is so wide-ranging that we can not comfortably recommend investors buy shares on this basis."
Because everyone wants to know their value, RIM chief executive officer Thorstein Heins was asked directly about them on the company's conference call Thursday.
"Given the activity in the sector, I ask for your understanding that I'm not in a position to really give you detailed information here," he said. "What I can say is that RIM is a very innovative company. We employ strong research groups. And writing patents, getting good patents, meaningful patents has and always will be part of RIM's DNA. And I think we're pretty successful in getting there. So without getting into any further detail, I think we are in a good position on patents."
With such opacity, even a bottom-up analysis to calculate a price floor for RIM's shares is impossible. That spells all kinds of trouble for the trading activity. When uncertainty prevails, everything is speculation.