In the political world, the general rule of thumb is the more vehement the denial, the more likely a charge/rumor/allegation is true. Think finger-wagging Bill Clinton or indignant Anthony Weiner. So when anonymous sources "close" to Research in Motion condescendingly deny a report that the beleaguered BlackBerry maker may split its hardware and software divisions or even sell a chunk of the company, you can safely assume those options are on the table. From The Globe and Mail:
The report mentions Facebook and Amazon as potential buyers, but on Sunday several people close to RIM dismissed the news as “a silly fantasy,” and “one of the most ridiculous ideas I have heard in a while.”
Is it really "silly" or "ridiculous" that a company whose fortunes continue to plummet with no end in sight, which currently is worth one-third of what it was a year ago and 6% of what it was four years ago, and whose once-leading market share is rapidly approaching asterisk status behind the iPhone and Androids, might be looking for ways to salvage some value for shareholders? Also read: RIP, RIM Wouldn't it be more silly or ridiculous, not to mention irresponsible, if that company's board wasn't actively pursuing dramatic strategic options that include a split or sale? Do the "sources" close to RIM take at face value -- or expect us to take at face value -- the company's claim in a May 29 "business update" that it hired J.P. Morgan and RBC Capital Markets only to explore "opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives"? One would hope not, especially since the May 29 statement also left the company plenty of room to maneuver. Regarding the decision to hire RBC and J.P. Morgan, RIM said:
These advisors have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies...
Since a former RBC analyst last year suggested RIM split its hardware and software businesses, it's reasonable to assume the idea has been kicked around the office and in meetings with RIM. Seriously, wouldn't there be something wrong if it weren't? But denials buy time, and RIM is in that strange place where it needs more time figure out how to salvage something from its implosion, but is running out of time to execute. After all, we're getting to a point where you have to wonder 1) how long RIM can continue to lose money and lay off staff before going the way of Nortel, and 2) whether RIM has assets worth enough to any potential buyer. Eric Savitz at Forbes wrote about this on Tuesday, quoting a note to clients from Wedge Partners analyst Brian Blair:
“We don’t see an M&A opportunity near term, mainly because we don’t believe RIM has much to offer. If there was value in the Network Operating Center back in the day, it seems to have faded. If we have learned one thing from the iPhone, it’s that the device’s security is ‘good enough’ for the government and ‘good enough’ for the enterprise. We have seen every type of company replace BlackBerry with the iPhone over the last 3 years. If there is value in RIM’s Blackberry servers placed around the world in large numbers, that value is in decline, as those same servers continue to get ripped out on what seems like a monthly basis.”
Meanwhile, in the face of this grim reality that the entire technology world can see, RIM clings to the truly silly and ridiculous, stating in response to the latest rumors that it intends to regain its former glory under the bold and awesome turnaround plan forged by new CEO Thorsten Heins. Now there's a fantasy. RIM will report earnings on Thursday. Expect more stonewalling, denial and delusion about the company's future. Shares (NASDAQ: RIMM) were up 1.1% to 9.20 in early Tuesday afternoon trading after dipping to 8.83, their lowest point since 2003.
Now read this: