RIMM has been the epitome of a Value Trap. It will undoubtedly become a great business school case study.
If you have been following me on twitter, you would know that i have been bearish on RIMM for years, and I still am extremely bearish on their current business.
However, I do think RIMM is close to becoming a real value opportunity. This will obviously depend on current management’s willingness to change, and therein lies the biggest risk.
Based on the company’s Balance Sheet as of June 2nd, I think there’s “only” a $1.25 downside vs a much larger – albeit harder to quantify – upside. Upside potential is mostly in patents, licensing their technology, & deals with GOOG’s Android or MSFT.
Please see my spreadsheet on RIMM’s Balance Sheet, and note the discounts to the assets side of the balance sheet to create Fair Value TBV.
- MicroFundy
How do you determine these fair values?
Arbitrarily.
Obviously, i tried putting in a worst case / liquidation scenario.
So first i discounted all intangibles + goodwill (last q).
Next was inventories, i chopped off 80%. (if they would want to sell Playbooks in liquidation that’s probably what it would take (see HPQ’s touchpad)).
The rest were discounted to 80-90% arbitrarily (except cash & ST Inv @ 100%)
hard to estimate a projected buyout price but it appears to be north of $10, yes?
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