There’s still a lot to like about RIM

commentary OK, so I’ve been as hard as anyone on Research In Motion. But it’s not all bad.

Sure, the company is burdened with a bloated management structure, leaders who in recent months just can’t do anything right, and a trajectory that only seems to be headed further south. It’s in the doghouse with investors after losing more than three quarters of its market value last year. More importantly, RIM’s share in its home market of North America is slowly being ceded to Apple and Android.

But with all of the RIM bashing in recent months, it’s easy to forget that despite its troubles, the company is actually on solid financial footing. Sure, its stock has tanked over the past year, but share price is a leading indicator, and not an accurate measure of the company’s current financial position.

RIM, for all of its missteps, is still a company able to generate more than US$5 billion in revenue and nearly US$900 million in cash flow from operations in a quarter. It is a company with a clean balance sheet held down by little debt. It is a company that has a valuable stash of intellectual property at a time when owning the right patents makes all the difference.

In other words, maybe it’s time to cool it with the BlackBerry-is-doomed talk.

It’s hard not to get sucked into that line of thinking when the constant flow of news is negative. On the heels of disappointing quarterly earnings last month, co-CEOs Jim Balsillie and Mike Lazaridis warned that the first next-generation smartphone using BlackBerry 10 wouldn’t hit the market until late 2012. Earlier today, the company slashed the prices on its PlayBook in the US, a further illustration of its inability to move the failed tablet.

But a bit of positive news also trickled out yesterday, with a report that RIM is preparing to name a new chairman and strip the title away from Lazaridis and Balsillie — a move that could bring a more objective view to the direction of the company.

Here are some other positive points to consider: BlackBerry’s brand, which may have lost its lulstre a bit in the US, is still strong overseas. Much of its growth is coming from the emerging markets, where phones admittedly are of the lower-end variety. One of the primary drivers of that popularity is the heavy use of its BlackBerry Messenger service, which further drives adoption.

So despite the doom and gloom surrounding the company, RIM’s subscriber base actually grew 35 per cent over a year ago to 75 million users in the fiscal third quarter.

And while the 14.1 million BlackBerry devices it sold in the period was a slight decrease from a year ago, it’s still an impressive figure that puts it up in the same stratosphere as the top smartphones manufacturers. In comparison, market leader Samsung Electronics shipped 27.8 million units while Apple shipped 17.1 million iPhones, according to Strategy Analytics.

RIM also has a collection of intellectual property that still gives the company additional value. Between its applications and granted patents, it has the largest portfolio out of all of the major technology companies, according to a study by MDB PatentVest.

Intellectual property is at a premium after Google agreed to buy Motorola Mobility for US$12.5 billion, largely for its patent portfolio, and a consortium of technology companies — including RIM — paid $4.5 billion for patents purchased from bankrupt Nortel Networks.

Sanford Bernstein analyst Pierre Ferragu estimates the company’s patent portfolio could be worth US$3 billion to US$4 billion. The company currently has a market capitalisation just above $8 billion.

RIM’s assets are worth enough to garner interest from a number of companies, from Amazon to Microsoft and Nokia. While I still don’t think either combination would have had a legitimate chance, the perceived value those companies saw in RIM is real.

Clearly, RIM has a tonne of challenges ahead of it. As an investment, the stock is a bad bet. But it’s too easy to forget that the company has built up a position of strength that it won’t be letting go of anytime soon.

RIM may still end up crashing eventually, but I wouldn’t count it among the walking dead yet.


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