There isn't enough of RIM to buy: analyst

Ahead of Research In Motion's (RIM) earnings on Thursday — where the company is expected to announce a painful quarter — one analyst has said that the BlackBerry maker has little to be desired by prospective buyers.

"We don't believe RIM has much to offer," said Wedge Partners analyst Brian Blair, in a research note.

Although its share price began to free fall earlier this year, it has no debt and has in the region of $2 billion in cash sitting around, which would make the company look like an attractive buy.

But following the suspension of trading to announce an expected operating loss, the company has opted to chip away at its employee base, over dipping into its cash reserves.

Its smartphone-making business is struggling with the late-to-the-party BlackBerry 10 operating system and range of supported phones.

The only stable thing RIM has left is its data infrastructure and its vast array of patents. Even then, its patent portfolio doesn't come close to Nokia's — which, in turn, is also fading fast, perhaps faster than RIM is.

And the relationship is entirely symbiotic. The fewer handsets that need secure data infrastructure, the less value the data infrastructure has; without BlackBerry handsets that need support, the data network is redundant.

Blair said:

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.

He noted how "every type of company" has replaced their array of BlackBerry handsets with iPhones.

If there is value in RIM's Blackberry servers placed around the world in large numbers, that value is in decline, as those same [BlackBerry Enterprise Service] servers continue to get ripped out, on what seems like a monthly basis.

The company is then left with its patents, he said.

Yes, the company has real intellectual property around email delivery, and they still do some things that companies like Apple can't (ever try to delete an email on an iPhone when not connected to the network?), but, overall, their manufacturing capability isn't worth much, in our view.

Nokia has around 30,000 patents and 10,000 patented inventions. These are currently the company's "most valuable and stable assets ... crucial to its longer-term survival", according to The Guardian's Charles Arthur.

RIM, on the other hand, has more than 4200 patents with the US Patent & Trademark Office, thought to be worth around US$1 to US$3 billion. RIM would likely be better off licensing its technologies out to partners and interested parties than selling off its long-term patent assets, as it guarantees a long-term revenue stream rather than a bulk one-off payment, which it doesn't need yet.

Seeing as BlackBerry OS is to be phased out in favour of RIM's QNX-based operating system, what about BlackBerry 10? Could the company flog it off at a competitive price to the nearest seller and gain a return on the blood, sweat and tears — and not to mention the job losses — that has gone into the software?

According to Blair:

We don't think anyone would consider buying the operating system at a premium price. Even Amazon, who we could make an argument for, seems to be standardising on Android. We also don't think Samsung has any interest, as their Bada platform is more advanced than BlackBerry.

In a nutshell, Blair says that BlackBerry 10 cannot "compete meaningfully" against the three major operating systems that are already out there — Apple's iOS, Google's Android and Microsoft's Windows Phone.

The potential for RIM to offer a more appealing, completely new and different OS, without a keyboard (initial devices won't have it), and with no apps and no ecosystem, to enterprise and consumers is incredibly slim.

He notes how RIM is "not a software company at its heart", and that it has taken a beating from those who are software companies, again Apple, Google and Microsoft, who continue to generate vast amounts of revenue from their software operations.

Via ZDNet US