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MotleyFool: Why I'm Buying RIMM
http://beta.fool.com/mooseelz/2012/07/11/sub-8-i-am-buying-rim/6954/?ticker=GOOG&source=eogyholnk0000001
By Moustafa El Zanaty - July 11, 2012 | Tickers: FB, GOOG, RIMM | 5 Comments

Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

RIM (NASDAQ: RIMM) had their annual shareholders meeting yesterday, and as you could imagine shareholders and executives weren’t roasting marshmallows and singing Kumbaya together.

There were some very unhappy investors and many felt that there should be a shakeup similar to what happened at CP Rail where the entire board was changed along with a complete shakeup. Though some investors voiced their opinion about RIM's board and the problems that the company is facing, all members of the board were re-elected though some withheld their votes as a sign of dissatisfaction with the board’s performance.

Those who have seen the company fall from over $100 a share to under $8 would be hard pressed to view any current board members who were with the company during their huge descent as capable. Though this could be very true, RIM is not a railroad ... it's a company in the midst of the most crucial product launch in its history. RIM needs to be doing what they are doing, which is slowly changing the old guard while continuing to attempt to innovate a new product launch and be able to successfully release it in a variety of markets on a variety of continents.

The shares recently plunged further after RIM announced layoffs and a delay in the release of BB 10 till the first quarter of 2013. During the meeting the company disclosed that a probable January launch for BB10 was in the works.

RIM shares plunged further after the meeting as reports surfaced those investors were still unhappy with the company and the direction it is choosing to take. I find this particularly strange as RIM has done everything that traditionally one would expect form a company attempting a turnaround. They have reduced expenses, they have changed management and they have delayed a product launch so as to be able to improve the product and not have it rushed to market.

It seems the only news that the market will positively react to concerning RIM is a potential breakup of the company and sale of the parts or a takeover by a cash-rich tech giant. Google (NASDAQ: GOOG) paid $12.5 billion for Motorola Mobility, which at the time was over a 60% premium to what the shares were trading at. Google’s android OS has been adopted by several major handset makers and has grabbed a major piece of the mobile pie. Google is more interested in being the mobile search gateway for users as it has become the premier gateway to find stuff in the traditional internet. We sometimes forget that though Google has come out with a lot of cool products and services most of its revenues come from ads. Google’s mobile play is in its essence an attempt to improve its potential revenue in the mobile ad space.

Facebook (NASDAQ: FB) has its successful future strongly tied to how it can monetize the growth of its mobile user base. After its IPO it is flush with cash and has been courting the idea of getting into the mobile handset market. Investors see this as a savior for RIM and a way to recoup some of the lost equity many long-time investors have suffered. That will arrive much sooner than an outright bankruptcy, regardless of how steadfast management is today at focusing on a turnaround.

Can RIM be saved? Regardless of the answer, I strongly think it is worth much more then it is trading at now even with all the potential negative outcomes priced into the stock. RIM has over $2 billion in cash and earns over $4 billion just on licensing fees from mobile providers. Its market cap has dipped under $4 billion, which to me makes absolutely no sense.

Regardless of what happens the company can sell its parts or itself in a complete sale for triple that amount easily. I bought into RIM when the shares were in the low $20s and have seen my investment lose over 70% of its value. I have written several blogs about RIM and my perceived exaggeration of the market on how bad things are at RIM. When the stock dipped below $8, I took this opportunity to double up on my investment and put my money where my mouth is, so to speak. I was able to reduce my overall buy-in on RIM to $12 a share.

I strongly think that the market has overreacted to RIM and its prospects and see it being worth at least $15 a share in the next year to a year and a half. Whether RIM accomplishes the turn around, is sold to the highest bidder in parts or as a whole it will be worth much more than $7 a share. This is my opinion, which I fully understand is not shared by many, but as honesty is the Foolish way, I felt that I should put this down in writing.