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RIM hires Milbank, Tweed, Hadley & McCloy LLP to oversee a potential restructuring

RIM
By Bla1ze on 21 Apr 2012 04:02 pm EDT
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Over the past few weeks there have been plenty of talks surrounding the future of RIM and what exactly to do about their current situation. Many reports suggested that RIM was seeking financial council on how to further proceed and today Reuters is reporting they've now taken on council from Milbank, Tweed, Hadley & McCloy LLP to help oversee a potential restructuring plan, possible selling of assets, licensing of patents and joint ventures.

Reports previously suggested that RIM was working with some of the world's larger carriers to create a system that would open up their network to them, essentially allowing non-BlackBerry devices and their data to be routed through the RIM NOC and offering some of RIM's added value services to those devices such as BlackBerry Messenger. These ideas were originally brought forth by former Research In Motion co-chief executive Jim Balsillie and said to of have been shot down internally by RIM's board due to fear of dilution of the BlackBerry brand.

With the news of RIM now taking on council from Milbank, Tweed, Hadley & McCloy LLP it seems as though those plans may once again be rising from the inside, for better or worse. Realistically, the ideas that Jim Balsillie had weren't all that bad -- they made sense and would certainly help keep RIM from going any further into the red if adopted. Whether or not those plans will be put into action remains a mystery though as RIM may choose a different path.

Source: Reuters

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RIM hires Milbank, Tweed, Hadley & McCloy LLP to oversee a potential restructuring

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Little to late for what? Why do people regurgitate what they read in the media and repeat it as if it was their independent thought? What silly people we have here.

I notice this happens a lot. I sometimes have discussions with people who think they are experts in iOS, BB, Android and predicting RIM's fate, yet they don't have any professional qualifications on anything relating to the technology field (not that they have to, but you know what I mean when joe the plumber starts talking to you about "RIM's mistakes"). They basically recycle and spread what they read in the press.

Too late for what??? Do we drive innovation or do we try to curb it. They are trying to showcase that they are in their right path. But no one is interested. Instead, any news about them is taken as an opportunity to thrash them. People are born cynic including me. As long as we don't know what exactly is going on, better wait. ... :)
If you question about innovation. did you guys ever tried reading this catalog of BB Jam??? - https://bbworld.blackberryconferences.net/2012/scheduler/newCatalog.do

RIM has been trying to catch up since 2007 when the first iPhone came out. They are still trying to catch up so logically this move is a little too late but "better late than never" !

I hope I'm wrong but this seems like one step away from adminstration. Surely not though, RIM is cash rich isn't it? Hopefully this will be a positive step towards the RIMpire stiking back.

The way for it to strike back is actually pretty simple:

1. Develop product.
2. Announce product and its release date.
3. On release date, release product in adequate quantity.

RIM habitually reverses the first two and usually doesn't get around to the third at all.

It's a bleeding miracle they're still in business at all. They won't be for much longer unless they master the above, at a minimum.

depscribe

Alas, more likely than you think. All it would take is a takeover, ala HP-Palm, or a shareholder revolt -- gee, can you think of any reason why RIM shareholders might be less than delighted? -- whereupon it would get parted out or sold into merger. It would then be, for our purposes, out of business.

Indeed, the surprise at present is that it hasn't happened already.

depscribe

Why don't you write them a letter outlining your analysis and proposed plan of action? I am sure they would love to hear from you.

3Dee, definitely no administration. RIM did incur a loss in net income due to poor inventory management this last quarter, but they have been profitable each quarter for the last 7 years.

What stood out from the latest earnings report and I'm surprised that CrackBerry and Chris U did not expand on this; Is the continued decrease in profits from hardware despite increase in profits from services. Gross Margins on hardware have fallen from the 40s, to the 30s and now to the 20s, this all occurred within the last 3 years.

Therefore, my belief is that RIM is in the process of exiting its hardware business, signing a strategic partnership with somebody like Samsung, and licensing its future BB10 OS. While continuing to expand it's services business to other mobile platforms. The services business has quite high margins and if you look at the revenue it brings in, >$1B per quarter.

follow me on twitter @SurrealCivic if you want to hear more analysis of mine on Research In Motion.
Thanks

Very true the software segment is highly profitable, margins on the hardware not that great but both compliment each other.
Keep in mind that gross margins were impacted by inventory provisions, without these writedowns gross margins were around 40%

Exactly!

The fact that they are making most of their profits from the service business is very, very important.

In later comments people say that the margins on hardware for other companies are slowly getting squeezed as commoditization takes hold. RIM is different from other companies in that it currently doesn't need to rely on hardware sales for profitability.

High margin service delivery is their key differentiating strength. It is the reason that they are still putting cash in the bank.

Thus, I see RIM doing limited licensing of BB10 to a few key manufacturers. And then reaping the high margin profits from service delivery.

Samsung makes some very nice hardware and they sustain their margin targets. I would not rule out the possibility of RIM selling its hardware patent portfolio (which includes the authentic BlackBerry QWERTY keyboard patent) to Samsung and licensing its BB10 OS to them as well. Samsung did sell 250 million phones last year, 5 times as much as RIM.

Hire law firm = negotiate best price for parts > sell > close shop and go home.

I really wished it never came to this... but

A law firm isn't going to value their three businesses (hardware, software, services) and patents; that is the job of an investment bank which they have yet to name. We'll find out soon, I'm expecting a large shift in strategy announcement next earnings release (or potentially before). Their next earnings announcement is June 28th.

It's definitely possible, it has been hovering in the $12.50 - $14.50ish range for several months now. But with rumors of them hiring an investment bank and now the law firm, and BBWorld/BBJam in a couple of weeks; my expectation is for the stock to trade at the high end of that range.
Check out my tweets @SurrealCivic for charts showing this analysis.

RIM has assets worth a fortune. The NOC is worth a fortune, especially in 2012 when the smartphone market is reaching 1 billion people. The mobile market competition is really heated with so many players. All companies will have a tough time competing with $99 hardware. The good news for RIM shareholders is that the potential for RIM is greatest!

Rim currently has 77 million customers and the service revenue has unbelievable margins. BIS and BES servers, Mobile fusion, app store and other revenue streams like BBM music is what they need to beef up. Opening up BIS to another few hundred million users will ensure they stay alive in this new market reality.

People are coming to all these conclusions that Rim is selling parts and breaking up, etc. Why??? They have 2.1B in cash and are about to launch the best smartphone that has ever been created. It's almost 3 years in the making and everybody who owns a playbook knows how amazing QNX is.

What's with the rumor about Samsung's $3.5B partnership?? People's impression of RIM's financial situation is so wrong. They don't need Samsung;s cash. They don't need Microsoft's cash. They need to boost EPS by licensing and opening up. This is exactly what Thorsten said! In a couple of years there will be no money to be made in mobile hardware. Just like the PC business. Margins will be razor thin and there will be even more players trying to make a buck. The only companies that will be making money will be the carriers and service providers like RIM.

You make some great points, that I definitely agree with. They do need to open up, license OS to the masses, expand services to all platforms (and mobile fusion is the first step). And I definitely agree with you that there is little money to be made in mobile hardware. Look what happened to the LCD TV market, Sony is in the midst of exiting. Who would have ever thought ten years ago that Sony would exit the TV business? Not me.

How much is a fortune? :)

As for how much their services business is worth (ie. NOC). As of now, the market thinks its worth definitely less than $7B; we do know it is bringing in approx $1B of revenue each quarter. And its steadily increasing.

Totally agreed!

Service provision is not only RIM's strength, but it is also their biggest source of cash. And, as a key differentiator, it is their competitive advantage.

Service provision is an abstract concept, so it is more difficult to discuss. Instead people get fixated on declining phone sales because that is more tangible and easier to follow.

However, if RIM can maintain a low level of hardware market share, then fees from service provision will carry it nicely. And any licensing deals will add extra cash to their bank account.

Let me say first that I have been and continue to be a big fan of the Blackberry products (typing this comment from my playbook), but I personally think it is too late for RIM. They may have cash on hand but it is decreasing not increasing. It will continue to decrease as people abandon their BBs for other products that cater to consumers but that are capable at tempting business users. I recently switched from a BB Bold 9930 to a Motorola RAZR Maxx and was astounded at what the Maxx could do compared to the BB. I know that BBs do somethings better than other phones but they pail in comparison to other high end products overall. Too bad actually, I really do love the BB experience in some regards. But it can't compare to the overall ability of the Maxx, at least in my opinion. And many other business people I come in contact who have had BBs for 10 years are fed up with RIM.

I think this is too late. RIM will not be able to compete against Apple or Google.

So why compete? RIMM is (hopefully) close to maintaining their competitive edge.
But, if they aren't close enough - time for plan two!
Not being able to import Outlook into Playbook native email securely scares me!

I have read many posts claiming they once used BlackBerry's and have switched to a competitors device and claim how great their new device is, how much better it is yet they never say why it's so much better, why is that?

Here are a couple of examples.

1. battery life on the Maxx is about 20-21 hours a charge.
2. The screen is sooo much easier to read, navigate and actually do work when the need arises.
3. The apps actually work much better on the Maxx than similar apps on the BB. Scanner Radio is one such app. On the Maxx it starts up within seconds. On the BB it sometimes took a inute and even then it didn't always stream.
4. Beleive it or not I experienced many more issues on the BIS email system than I do using the Maxx.
5. Free Google navigation. As someone who liked and used BB's Traffic app, i can say without a doubt that BB is far behind Google in that respect.

These are just a few examples. There are many more. And i realize that BB has its attributes, for me however, they are just not significant enough to out weigh the huge benefits provided by the Maxx.

My bb is faster then my friends iphone 4s and my other friends HTC and I always have more signal strength in troubled areas. My bill is cheaper then theirs is and I use my phone twice as much. Email is 10x better on bb. Just saying...

Torch 9860, Playbook

You sound foolish or ignorant of facts. They have cash and it's not going down....In Fact it went up 600million last Q from 1.5 be to 2.1b that is an Increase . Unless you are using troll mathematics.

I didn't post this to troll. You can believe what you will. And I will not get into an argument with you about this, I really have no need to sink to your level of intelligence.

Just take a look at the numbers and compare them to what they were i past years on a percentage level and compare them to their competitors' numbers. The facts speak for themselves and the fact is RIM is in trouble and possible on life support. like I said above, I wish it wasn't so. I will not by Apple and I am not thrilled with Google as a company, but I cannot accept the subpar hardware being produced by BB.

I'm just enjoying watching apple's stock fall $15 a day, bb is not the only company without a really new product in 4 years. I think people will actually catch on sooner then later. I just hope it's not to late for rim

Torch 9860, Playbook

I loved seeing it too! But one thing Apple is good at is marketing. They have built such a brand, that people go and buy similar hardware each year. iPhone 5 must be something entirely different from what they have been offering. But then again, they might put customizable widgets and that would be 'revolutionary', thanks to their marketing prowess. RIM needs to do some great marketing to pull through.

You claim to be a fan of BB, but go on to say that it is too late for them. Then you talk about why you switched to the Motorola Maxx. Let's be clear about something -- you bought the Maxx because you liked it and wanted to switch phones. Not because the 9930 wasn't a great smartphone, or didn't get the job done. That's your decision. Don't use it as a platform to justify your feelings that RIM has failed.

That at all. All they're doing is seeking advice. I know they aren't going to license their OS's out to other providers, that would ruin and dilute the blackberry brand name. They might be thinking of a partnership, which doesn't give the company their partnering with, the chance to destroy them. At least I don't think so. All I hope for is they don't get bought out, sold and destroyed or taken over. How many jobs will be lost? 10's of thousands. I don't want to see that happen either.

I hope RIM is left to be and run on it's own, they're doing fine, wallstreet is just being an asshole and probably somebody is fucking with the stocks on purpose, I hope they get caught. Because that ain't funny at all.

Definitely agree with you there. RIM is like Apple. One hardware One OS. Apple of course knows how to get the consumers RIM needs to do the same. I know they have the potential to make some really nice phones that even Apple could get jealous.

The BB10 concept design was impressive. If RIM does go out of the hardware business. Then Blackberry as we know is dead. BB10 OS would be like another "Android". Their phones are fugly!. If for somehow the company sinks and goes out of business. I would choose Apple over Android anyday if it comes down to that.

This is good news to hear that finally some changes are happening. With that being said. I am very eager about BB10. Simply put. RIM's hardware portfolio can't be beat. Just spice up the software is all it needs.

This is your last Chance RIM.

What did you mean by one hardware, one OS? RIM has so many hardware pieces running OS7. Yes, it might change with BB10, but who knows?

I still have a Bold 9900 and also use the Galaxy Nexus. By no means all Android phones are 'fugly' as you put it. RIM makes the best QWERTY devices and the least desirable all touchscreen devices. I sincerely hope that RIM comes out with a great product with BB10, and that too a touchscreen one.

Licensing patents, not a bad idea. Licensing QNX (not BB10), the more the merrier. Licensing the phone and tablet OS, or giving carriers free use of the NOC, terrible ideas. And what assets could RIM afford to lose? I can only see very few options available that will not somehow dilute the BlackBerry brand. I don't care about Apple or Google, nor do I care if RIM tries to compete with them at all. With any brand of any product in this world there are bigger names and smaller names. If RIM has gone from one to the other, I don't see any reason or good deed to consumers in them folding. Why do all these goofs keep saying RIM should sell, or use another OS, or license their own OS? What advantage does the death and removal of the BlackBerry brand on the market serve consumers? Or serve the many businesses that want BB and BES? RIM does not need to be top-dog to stay alive and well. Plus, how many customers does it take for a company to matter? There are enough BlackBerry customers in this globe, so many millions, I don't see what such a thing needs to be diluted or killed at all. I guess we're all supposed to accept this two-horse race bullshit.

Many companies have gone through a similar situation as RIM. The fact that they won't be able to compete with Google, Apple and eventually WinPhone is inevitable, they must innovate and transform their business model to adapt to the reality of the market place. They have assets and are leaders in many areas that can be used to carve out a new niche in the mobile space. That niche likely won't be consumer handsets. I have a Bold that is issued by my company that I would never use as my personal device but suits me fine at work. RIM has an opportunity to carve out a new and better future. Hope they take it!

RIM reminds me of the old Nextel prior to being bought out. I wished microsoft would have partnered with Rim. I wish them the best...I'm blackberry for life. I've been using RIM products since the first inter@ctive pager. That pager put the nail in the coffin of traditional pagers. These guys were always one step ahead of their competition.

RIM's software is a necessity in certain industries and because of that they will always be around...just on a smaller scale.

Just like push-to-talk.

A great and balanced article on the future of RIM in the market outside of US:

http://www.reuters.com/article/2012/04/18/uk-rim-asia-idUSLNE83H00Y20120418

several interesting points that caught my attention, some positive, some negative:

-RIM does still have a market outside of the developed markets
-BB handsets sales are inversely related to 3G network adoption (which may not necessarily be bad as many countries in the world will still be on 2G for a very long time and iPhone and android are simply not effective on 2G)
-RIM's success in Indonesia is related to striped down telephone plans and cutting the price of the handsets to half, both of which it has not done in Eastern Asia, where RIM is virtually gone
-Indonesians now use Whatsapp on BB whether than BBM because of it being the more universal IM

In other words, I personally think its a good indication that wherever RIM tries to market itself as a premium handset brand, it fails, and all these things like BBM, security, and BB native functions simply do not matter at all. BB's current survival in the international market lies in tackling the cheap handset market, not with innovations/functions, but whether the lack of functions which enable it to be used effectively on 2G.

That implies that if RIM focuses on the international market for the next few years, American market will by definition suffer even more because the handsets required are completely different products, RIM will have to shift its production and development toward efficient use of the lower-end specs and tackling functions on <3G.

On the other hand, if RIM keeps the developed market happy, then it will dilute its development efforts for the lower-end market.

So it's either CheapBerry from now on (which will make the majority of us quite unhappy), or suicide...

RIM Is launching a "new" BB Curve in India these days. Very low prise , 2 megapix. camera ......! A female Bollywood star was seen holding this "Cheap Berry" smiling ! Is this the future of RIM ?
Launching very cheap phones with 2 megapix. Camera , no touchscreen , no...... in Asia ?

But I am quite reluctant to use India and UK as an example for anything because they are the only 2 places where BBM is not dead--using only BBM in UK and India actually can communicate but in most other places in the world, it's just not feasible. I only have 12 contacts that I can reliably BBM to right now (there are several that sometimes use a BB and sometimes don't), and all 12 of them are also on whatsapp. The rest of the contacts are on whatsapp.

Except mostly in the UK and India, BBM is not a feasible product nor is it a selling point any longer for general consumers.

RIM needs to do something not only for future users, but for the current users too. And for the people who keep saying don't put BBM on other platforms I would really like to know how often do you use BBM and who can can you im with BBM

They need to hire a kick ass marketing firm. That's where I see the biggest hole. The media needs to be used to put the name back in the forefront. RIM is working feverishly on BB10. They need to market the Playbook in the US which I think would be a sales catalyst when BB10 phones hit. The Blackberry brand name needs to be seen and heard. If I had a buck for every person that asked 'what's that' when they see my Playbook. I know many people now with a Playbook and they love it. They all sing the same tune though - why don't we see this thing advertised? Perception (aka marketing) is everything. It can make a crap item look awesome yet without it, an awesome item isn't known.

Come on RIM, where is the marketing??

Roz K.

Saw this yesterday, also an article on Nokia - two companies that once held major market share and sat on their laurels. Can RIM recover? Possibly not and now are looking for best ideas to increase market share and profits and reduce costs. Might be too little too late and then woe to us BB owners. But then, Apple has yet to deal with loss of Steve Jobs - didn't do too well last time he left but this is permanent. I am Canadian - I hope for RIM

I don't think anyone would buy rim other than for the patents then shutting them down for good bb10 might not even come out so i hope they don't sell any part of the company.