Research In Motions: Where to Go From Here

Posted by Ahmad Barirani in Blog

May
10

The once amazing Research In Motion is no longer Canada’s most valuable company. How did that happen would make a great case study in business schools. However, there is something else that interests me in RIM: its imminent acquisition.

The imminent acquisition of RIM

Let’s face it, RIM will not be able to dethrone Apple or Samsung. The dominance of the smartphone market will be fought between iOS and Android. Even the enterprise sector, RIM’s self-proclaimed stronghold, is at danger of switching into Android. It simply doesn’t make sense for anyone to go with a BlackBerry.

RIM is however a technology company and own a relatively large patent portfolio. And in an industry marked by intellectual protection litigation cases, a strong patent portfolio is a valuable thing to have. Patents however, are not enough to generate income. At least not the kind of income that can support the operations of a large smartphone manufacturer. All of this points out to the imminent acquisition of RIM.

RIM’s patent portfolio value

Smartphones are complex technology. Every single product is a combination of dozens (or hundreds) of patents. In such context, single patents are not so valuable but bundles of patents do matter. For instance, Google paid the equivalent of $400,000 per patent when it acquired Motorola Mobility with its 17,000 patents. Rockstar Consortium, which acquired Nortel’s portfolio (6,000 patents), paid $750,000 per patent.

With 2700+ patents, RIM can be sold for somewhere between $1-2B if we extrapolate with the above data. Based on similar considerations, other analysts put a price tag of $2.5B. Yet, stock markets do not seem to agree with such valuations as RIM has a ~$6B market cap with a P/E ratio around 5 as of May 2012. What would an intelligent investor do?