How low can it go? RIM falls below book value

Shares of BlackBerry maker now worth less than net value of assets

Shares of Research in Motion (NASDAQ: RIMM) fell to as low as 18.13 in early trading Thursday, a drop of 4.1% from Wednesday's closing price of 18.91.

The decline in stock price is notable for two reasons: 1) It's the lowest price for RIM shares since August 2004, or more than seven years, and 2) It puts the embattled BlackBerry maker below book value, an indignity it hasn't faced since 2002.

From Bloomberg:

Research In Motion Ltd. (RIMM)’s decline below book value for the first time in nine years leaves the BlackBerry maker worth less than the net value of its property, patents and other assets in a sign of investors’ lowered faith.

RIM fell 2.9 percent to $18.37 at 10:27 a.m. New York time, trailing the book value of $18.92 a share at the end of last quarter, according to data compiled by Bloomberg. The measure comprises a company’s assets including cash, inventories, real estate and intellectual property minus its liabilities.

RIM has had a horrific year. It continues to bleed market share -- particularly to Google's Android mobile OS -- in the smartphone sector it once dominated, a decline that was partially obscured (and rationalized by RIM apologists in the analyst community) by the overall growth in smartphone sales worldwide.

But the trend caught up with RIM in its fiscal second quarter ended in September, when the Canadian manufacturer reported a 10% decline in revenue from last years' Q2 and a 15% decline in sequential quarterly revenue. Co-CEO Jim Balsillie attributed the sales shortfall to "lower than expected demand for older models."

Let's not leave out greater-than-expected demand for smartphones and tablets made by RIM's competitors. But RIM seems to have a problem admitting it has fallen behind its rivals. Even as recently as March, Balsillie said he was "bullish on the company and its prospects for this fiscal year."

It's highly unlikely Balsillie still feels "bullish," unless he's delusional. In mid-September the company forecast third-quarter smartphone shipments of between 13.5 million and 14.5 million units, the mid-range of which falls below shipments of 14.2 million in last year's Q3. Again, this is as the smartphone market itself continues to grow.

There's a good reason RIM is now below book value. The company's sliding toward dangerous irrelevance, and appears incapable of reversing direction.

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