Thorsten Heins, president and chief executive officer of Research In Motion Ltd. (RIM)
Finally, a ray of hope for Research in Motion, the embattled Blackberry-maker. The Waterloo, Canada-based mobile company’s shares rose as high as 6.4% on Wednesday after a top Wall Street analyst suggested that handset giant Samsung might license the Blackberry 10 operating system, the forthcoming product that RIM has staked its future on. It’s all speculation at this point — and Samsung was quick to pour water on the chatter — but the idea of a licensing deal, if not an outright acquisition, points the way to a possible lifeline for RIM as it struggles to turn itself around following years of deteriorating performance.
There is a growing consensus on Wall Street after watching RIM’s market-share plummet in the face of competition from Apple’s iPhone and Google’s Android, that the company cannot survive — let alone thrive — on its own. According to data released Wednesday by research firm IDC and cited by CNNMoney, Android has taken a commanding lead in the global smartphone race with a whopping 68% market share, compared to 17% market share for Apple’s iPhone. (That may sound like a huge gap, and it is, but it shouldn’t be surprising because Android runs on many individual smartphone models — including Samsung’s mega-hit Galaxy S III — while Apple’s iPhone operating system only runs on, well, the iPhone.)
(MORE: Blackberry-Maker RIM Could Face Testy Crowd at Annual Meeting)
Blackberry shipments, meanwhile, fell a startling 41% last year to 7.4 million, dragging RIM’s market share below 5%, the lowest level since 2009, IDC’s study found. It’s no surprise that RIM’s stock price has plummeted by more than 80% from a peak of over $140 in 2008 to its current level under $8. Last month, the company reported a $518 million loss and said it plans to lay off 5,000 people — about one-third of its work force. RIM has announced a “strategic review” of its business and hired JPMorgan Chase and RBC Capital to help evaluate its “strategic options,” which can include anything from a break-up to a strategic partnership like a licensing deal, to an outright sale.
Against this backdrop, it’s not hard to see why RIM investors were encouraged by a report from Jefferies & Co analyst Peter Misek, who wrote Tuesday that RIM’s strategic review could lead the company to conclude that it must license BlackBerry 10, the much-ballyhooed — and oft-delayed — operating system slated to launch in the first quarter of 2013. “Given recent management comments in the press, it now appears that RIM is realizing what Wall Street has been saying for some time: They are a subscale manufacturer and desperately need a partner,” Misek wrote Tuesday in a research note cited by Reuters. “We believe RIM is attempting to revive discussions with Samsung regarding a BB10 licensing deal.” RIM shares rose as high as 6.4% on the report from Misek, who reiterated his view on Wednesday in an interview with CNBC.
(More: BlackBerry Crushed)
The key language here is “attempting to revive,” because it appears that RIM’s efforts to woo Samsung into a partnership appear to be unrequited so far — or at least that’s what Samsung is saying publicly. (Misek also speculated that Samsung could decide to buy RIM outright — the Blackberry-maker is worth one-sixteenth what it was four years ago — but said it’s unlikely any deal would happen until after Blackberry 10 launches early next year.) In response, Samsung moved to pour cold water on the report. “Samsung Electronics has not considered the acquisition of Research in Motion or licensing BB10,” a company spokesperson told tech news site AllThingsD.
For his part, RIM CEO Thorsten Heins, who has been on the job for less than a year, appears to be warming to the idea of a licensing deal with a major hardware company. After insisting last month that “there’s nothing wrong with the company as it exists right now,” Heins acknowledged last week: “We don’t have the economy of scale to compete against the guys who crank out 60 handsets a year.” He added: “To deliver BB10 we may need to look at licensing it to someone who can do this at a way better cost proposition than I can do it. There’s different options we could do that we’re currently investigating.”
As RIM’s “investigation” continues, Samsung is sure to be in the mix. The Korean mobile giant is red-hot right now, and recently overtook Nokia as the world’s top handset maker, ending the Finnish company’s 14-year reign. Samsung now sells nearly twice as many units as Apple’s iPhone. The Blackberry, meanwhile, remains a beloved product among its (dwindling) user-base. The reasons for RIM’s decline are by now well-documented — and the company is currently fighting for its very survival. If it comes down to a choice between a break-up or outright sale, and a licensing deal, it’s hard to imagine that Heins and RIM’s board would not opt for the latter. As they say, if you can’t beat ’em, join ’em.
(More: How Apple’s iPhone and Google’s Android Left BlackBerry in the Dust)