BlackBerry on ropes
Blackberry maker Research In Motion might be running out of options as it struggles to turn around its slumping fortunes with the help of a coterie of top investment bankers.
The bankers - including leading M&A specialists from Royal Bank of Canada and JP Morgan - will explore options as drastic as an outright sale, one of the alternatives that RIM seems determined to avoid.
But analysts and investors doubt that anyone is ready to buy the whole company at this time, despite a price that looks tantalisingly cheap on paper. Interest in RIM looks slim to nil, two sources close to the matter said.
RIM's market capitalisation is now $5.5-billion, down from $84-billion at the company's peak in 2008. It has $2-billion in cash, no debt and patents that experts said could be worth $2.5-billion.
"You are not going to sell RIM whole," said Charter Equity analyst Edward Snyder, who has covered RIM since its Nasdaq initial public offering in 1999.
"The biggest problem RIM faces is that it's a very illiquid market in suitors for its phone business."
"There are very few companies that could exploit RIM's (hardware) assets to make a go of it. Those who can are already beating the pants off RIM."
RIM virtually invented on-your-hip e-mail with its first BlackBerry device in 1999 and enjoyed almost a decade as a market darling, with quarter after quarter of soaring sales.
But it has haemorrhaged market share in the last few years, fading almost to irrelevance in a market dominated by Apple's iPhone and devices from the likes of Samsung Electronics using Google Android software.
RIM shares sank to an eight-year low of just over $10 on Wednesday after the company said the day before that it expected to report an operating loss this quarter, its first in seven years.
The company also said "significant" job cuts were on the way. Two sources said last week that up to 6000 of RIM's 16500 jobs could go by early next year.
Breaking up the company for a piecemeal sale is also a possibility, but an unlikely one given the complexity of such an action and management's reluctance to contemplate such a move.
A leveraged buyout may be a more likely outcome, although it also faces a number of obstacles.
Private equity firms have circled RIM over the past two years and have tried without success to figure out ways to buy the company.
RIM management, backed by the board, is fixed on a path to recovery that keeps its services business exclusive to BlackBerry, pinning its hopes on next-generation BlackBerry 10 phones that will come later this year.