Friday, September 28, 2012

RIM loses billions but manages to add 100m to cash reserves

You have to love it when a company widely believed to be going down the toilet manages to boost its already staggering cash reserves by $100,000,000.00.

In a single quarter.

That's the kind of losing proposition you might want to take a bet on.

Looking forward, the BB10 is said to be a make or break product.

Let's consider the worst case scenario. BB10 does a crash and burn. The BB brain trust throws up their hands, pink-slips the entire workforce, and auctions off the entrails of what's left.

Goodbye to 2.3 billion and a patent bank worth... aye, there's a mystery!

But it's not really that mysterious. Under that scenario the break-up value of RIM is at least double the close price today. Probably more.

Take a middling view, and RIM can keep losing money and adding 100m to cash reserves every quarter.

When the "losses" are tax-driven write-downs of goodwill and other nebulous accounting fantasies, this could theoretically carry on for years.

When you look at RIM market share in emerging markets vs. mature markets you can see that their story isn't all that bad. After all, those cash accumulations are coming from somewhere. They're losing market share in the most mature and over-saturated markets in the world.

They're more than holding their own in the emerging markets.

The last scenario: BB10 whacks it out of the park. RIM regains market share even in those mature markets. That eventuality would see a restoration of the stock price to levels we haven't seen in a couple of years.

No matter how you look at it, RIM is a buy in the current price range.

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