On June 29th Research In Motion (RIM), makers of "Blackberry' brand cell phones shocked the world by appointing bankers, JPMC & Royal Bank of Canada, to advise RIM on 'How to maximize the value of its asset'.
This is a clear indication by RIM that it has given up hope on being an independent cell phone manufacturer. Instead RIM is looking for increasing its evaluation through sale of assets or business.
The market valuation for Blackberry has fallen from a peak of $84Billion to about $5.4Billion in last four years. But the company is worth lot more than that. If Motorola is worth $18 Billion, then RIM should be worth more than that, but where is that value and how to unearth that remains to be seen.
Options for Blackberry
The current global economic crisis and customer's rapid shift towards iPhone & Android phones makes it tough for Blackberry to survive as an independent cell phone company. Making money from hardware manufacturing is tough.
As I see it, there are three good options for RIM :
1. Sell the company and reward investors
2. License patents and ditch the hardware business.
3. Ditch the hardware business and become a software service provider.
Selling the company is an easy route. Buyers will be interested in the technology and its patents. Given the high profile, fight-till-death patent war between Apple & Google, Blackberry can command a premium for its technology and thus unlock the value to its investors. This seems to be the easiest and a popular option.
The second option is to shut down or sell the hardware business and become a patent licensor. RIM has enormous patent portfolio. RIM can transform into a pure research organization that develops & licenses technologies. This frees up the company from all the hassles of hardware manufacturing, distribution, etc., and can concentrate on how to make the mobile computing world safe and secure with its technology.
The third option is an extension of the second option. The real value of Blackberry is in its services: safe, reliable and secure communications. RIM can make this blackberry service a universal one, and offer Blackberry e-mail & BBM services on other handset platforms such as Android or iPhone. RIM can concentrate on developing new technologies such as delivering Virtual Desktops on mobile devices, secure unified communications etc by extending its current technology. This will transform RIM into a software services company. The margins on software is higher than hardware and in the long run, investors will be richly rewarded.
As the world moves to the post-PC era, dominated by mobile devices & cloud technologies, Blackberry can emerge as a market leader in mobile enterprise software.
Closing Thoughts
RIM is at an inflection point. The management and shareholders of RIM have two options:
1. Sell & Quit
2. Transform and Prosper.
There are tremendous opportunities in mobile-cloud arena, and RIM has the technology which will enable enterprises and governments to use the mobile-cloud technology in a safe secure manner. There is money to be made.
But what will the shareholders decide? We will have to wait and watch.
