On August 15, Google Inc. (NASDAQ/GOOG) announced that it was acquiring Motorola Mobility Holdings, Inc. (NYSE/MMI) in a $12.5-billion, or $40.00-per-share deal, representing a huge 60% price premium to the previous close.
The key to the deal was the enormous resource of patents held by Motorola, which is attractive to Google as the company tries to build up its “Android” mobile operating system. Motorola held over 17,000 granted patents and about 7,500 pending patents.
The move to acquire the patents quickly led to speculation on which company could be the next significant patent play in the stock market.
It quickly surfaced that troubled Research In Motion Limited (NASDAQ/RIMM) could be the next patent play in the works. Yet, some question Research In Motion (RIM) as a target, as the company holds about 2,000 patents, well below Motorola’s holdings.
So maybe RIM will not be the target of the big patent play that Motorola’s planning on making, but the company is still worth a look. The company’s newly launched “Playbook” tablet is underselling the “iPad” by Apple Inc. (NASDAQ/AAPL), but then so is everyone else.
The scars from the tablet battle are already evident after Hewlett-Packard Company (NYSE/HPQ) shocked the technology world when it announced that it would be discontinuing the sale of its “TouchPad” tablet and smart phone.
RIM has not given up on its tablet, but it will clearly be a tough go for the company to compete against the iPad. Apple’s iPad is the “best of breed.”
While RIM is struggling in the United States, the company’s prospects may be the brightest in regions such as Asia, Europe, and Latin America. Of course, failure here could drive RIM into the ground as the stock that couldn’t beat Apple.
RIM just launched three new “BlackBerry” smartphones, with the new “BlackBerry 7” operating system. Again, the phones are facing tough competition from Apple’s iPhone, and it will not be easy. The key will be the international markets.
In my view, RIM may also need to get some fresh ideas and a change in leadership from the current co-founders to drive a new strategy for the company.
The best thing about RIM is its strong operating results and attractive valuation.
RIM has reported higher annual revenues in nine straight years from fiscal 2003 to fiscal 2011. Revenues grew from $294.05 million in fiscal 2002 to $19.91 billion in fiscal 2011, which equates to a Compound Annual Growth Rate (CAGR) of 59.74%.
But there is slowing. Revenue growth in fiscal 2012 is estimated to slow to 3.10%, but rebound to 9.10% in fiscal 2013. This is a concern when you consider that Apple’s revenue growth for the next two years is 66.20% and 22.70%, respectively.
RIM will face some tough hurdles ahead.
RIMM is down 43.67% over its last 52 weeks. The chart is showing a bearish death cross with the 50-day moving average (MA) well below the 200-day MA.
All seems lost for RIM, but the company is not ready to wave the white flag.