MONTREAL – Research In Motion is failing in the “dynamic” consumer market and should consider putting itself up for sale or spinning off its patent portfolio into a separate company, says an investment bank with holdings in the struggling BlackBerry maker.
“The company is broken and it has to be fixed,” said Vic Alboini, chairman and CEO of Jaguar Financial Corp., which holds less than five per cent of RIM’s shares.
The smartphone maker can’t rely on its upgraded BlackBerrys now out for sale or a new generation of BlackBerrys expected out next year, Alboini said Tuesday from Toronto.
“While few would question the email and security capabilities of RIM’s BlackBerry platform, the reality is that RIM has failed to develop the multi-purpose device that meets the requirements of today’s dynamic consumer landscape,” Jaguar Financial said in a statement.
Once a market leader, Research In Motion (TSX:RIM) has lost ground to Apple’s iPhone and to smartphones with Google’s Android operating system. RIM’s new PlayBook tablet appears to have made small headway against Apple’s iPad and tablets with Google’s operating system.
Jaguar is recommending that RIM’s board of directors appoint a special committee to ensure that shareholders get maximum value for their holdings in the Waterloo, Ont., company.
“This value maximization process would include the pursuit of all options including a potential sale of the company or a monetization of the RIM patent portfolio by a spin-out to RIM shareholders.”
Jaguar is proposing that RIM benefit from the “surge” of mergers and acquisitions among technology companies that hold patents with Alboini noting the “enormous” value of patents. It’s estimated that RIM has 10,000 to 15,000 patents.
“With its own stock of coveted patents, RIM is positioned to benefit from the increased appetite for intellectual property, but the board must change course and recognize the opportunity.”
Jaguar noted that RIM’s stock has fallen from a peak of C$149.90 in June 2008 to C$29.59 on Sept. 2 at the Toronto Stock Exchange or US$30.12 on Nasdaq, where the stock is also traded.
RIM shares gained 54 cents, or 1.8 per cent, at $30.13 in afternoon trading Tuesday on the Toronto Stock Exchange.
“The status quo is not acceptable, the company cannot sit still. It is time for transformational change,” Alboini said.
There have been calls for a change of roles in the top executive ranks. The chairman and chief executive roles are currently shared by Mike Lazaridis, one of RIM’s co-founders, and Jim Balsillie.
There has also been a re-evaluation of the value of patents held by technology firms since Nortel’s portfolio was auctioned off for US$4.5 billion – about four times more than anticipated – to a group that included RIM.
Jaguar also noted search engine giant Google’s $12.5 billion proposed acquisition of Motorola Mobility Holdings and patent licencing company Wi-LAN Inc.’s $480 million offer to acquire rival patent house Mosaid Technologies Inc. (TSX:MSD).
William Blair & Co. analyst Anil Doradla agreed that “something transformational has to happen” at RIM.
“In an ideal case, I would like a full take out of the company,” said Doradla, who’s based in Chicago.
Doradla said he doesn’t agree with spinning off RIM’s patents into a separate company.
“It’s a tough business model,” he said of a patent spinoff. “The minute you start doing that, it means a lot of lawyers, a lot of litigation.”
The company could also be sold off in pieces, such as the patent portfolio, the enterprise division, and the BlackBerry handset and operating system, Doradla said. Apple or Samsung could be possible buyers of all or parts of the company, he said.
“Even if something like this doesn’t happen, there’s going to be increased focus, increased attention on management now,” Doradla said. “They cannot just maintain the status quo.”
Research In Motion couldn’t be reached for comment on Tuesday.
Jaguar is a Canadian merchant bank that often takes an activist shareholder role.
There are seven independent directors on RIM’s board and Alboini said he knows five of them.
“So I believe that RIM has some quality independent directors and it’s a matter of taking action to, as we say in the press release, seize the reins here and do something.”
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