Research in Motion (Nasdaq:RIMM) announced drastically reduced earnings for Q4. Market reaction has taken a page or two from chicken little “the sky is falling” and then again for emphatic emphasis “the sky is falling”. Lets take a rationale look at some of the major issues.
- The new CEO just arrived 10 weeks ago. By the way he is looking for a new COO and the good news is he thinks he is close to hiring a new Chief Marketing Officer. Not to mention Jim Balsillie has just resigned from the board. The generals are still changing out. The guys that are leaving probably were not pushing at the wheel. Actually this was a good thing as most would agree they were not the winning team.
- Hey they only lost $128 million. That ain’t nothing but a chicken wing in the technology space. This only begs the question. Big change holds hands with big write-offs. The year-end was just closed off. That means this year will see more pain and financial agony. The new guys will be hired not to protect the status quo. By the way inventories are up clocking in at $1 Billion. Can you see some write-offs coming.
- The only good thing is the large increase in their cash position moving some $610 million to $2.1 Billion. This is the necessary set up move for solution. The new whatever will cost big bucks. Watch for continued cash hoarding over the next few quarters. When they start drawing down cash will signal the back field is in motion. The earnings release led with this point. Subliminal advertising designed to encourage the deep value investor.
- The cash position is roughly equal to 30% of RIM‘s market cap.
- No discussion about the value of patents and intellectual property. Of course if management starts hammering in this point it would confirm they are holding themselves up for sale.
So given the cash position would you pay approximately $4 Billion for the operating assets with substantial cash flow and all the intellectual property.
George Gutowski writes from a caveat emptor perspective
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- Beware the Temptation of Thorsten Heins (thestreet.com)