So it happened. RIM has broken through the psychological $10 barrier. I wrote a post on CrackBerry last week talking about why the stock was likely to keep dropping. We’re down another 10% since that time, give or take.
I also wrote up my thoughts on potential strategic alternatives for the company. We’re at a point where a solid BlackBerry 10 launch might not be enough. It would only be enough if RIM also had strong carrier channel launches, great developer momentum, and no screw ups on the actual product. It needs to amaze people and bring tears to our eyes
In terms of apps, I’d like to see some of the big names like Skype and Netflix on board. This is what would create social proof and tell people the platform has a future.
My thoughts on strategic alternatives included potential deals with Samsung, Microsoft, going private, and completely exiting the manufacturing business to become a niche leader in mobile device management. To me, that last option is akin to giving up. I didn’t write about selling the company for parts, but that’s obviously a choice too (and is an even worse version of giving up).
Some folks suggested (in reply to my post) that Sony is a good potential partner. They’ve gotten nowhere with Android, they have no alternative OS, t hey can’t support Windows (given their Playstation versus Xbox battle) … so RIM makes sense. QNX inside of TVs (Sony) and cars (RIM has relationships there already)? Not such a bad idea. I like.
Others suggested Amazon. I’ve written about that before. But I just see it as a content partnership, so I don’t really consider it much of a strategic alternative.
Then, just yesterday I wrote an article called, “It’s more like BlackBerry 9.66, not BlackBerry 10″
I meant for it to be a quick take on the stock price. It turned out into an examination of the company’s balance sheet. In talking with my good friend, Ed Zabitsky from ACI Research, we looked at the cost to restructure (layoffs), the available cash from working capital reduction (as RIM revenues slide), and the potential for cash burn from operations (excluding changes to working capital). We both agreed that RIM doesn’t have as balance sheet that can weather a big mistake at this point. This just validates the idea that BlackBerry 10 is critical, and the company’s final act to remain an independent force in the smartphone game.
Where does the stock go from here
If they convince the market they can recover, we’re looking at $20 in a heartbeat. Ditto for a strategic alternative outcome that the market likes. BUT, in the mean time there isn’t a whole lot of support down below. Cash will be consumed. Patents are soft assets that are hard to value. Look out below …
Let’s say you’re watching the stock and you believe they get bought, or sold for parts. You figure it must be worth a premium in that case. But what if the premium occurs at $5 and not the current $10 price? Well, you don’t make any money
And Game Theory suggests everyone knows this, so everyone waits, meaning the stock keeps falling. This doesn’t change the probabilities of a successful BlackBerry 10 launch. But it makes for a very scary next couple of quarters.