Things just keep getting bleaker for
RIM. With its revenues
stagnating and smartphone market share
dwindling, the BlackBerry maker is now facing new financial pressure from Jaguar Financial Group -- a Canadian merchant bank and RIM shareholder that's calling upon the company to do one of two rather unpleasant things: sell itself, or sell its patent portfolio. In an open letter to RIM's board of directors, Jaguar CEO Vic Alboni criticized the manufacturer for failing to "inspire consumer enthusiasm" for its products, and for bringing its devices to market too late. And, as share prices continue to drop, Alboni thinks it's time to make a change:
The status quo is not acceptable, the company cannot sit still. It is time for transformational change. The directors need to seize the reins to maximize shareholder value before more market value is lost.
Jaguar didn't specify the size of its RIM stake, but claimed to be calling for upheaval on behalf of "other supportive shareholders" who, in total, hold less than five percent of the company. The Ontario-based firm is hoping that a new line of
QNX-based smartphones will curtail its slump, but Alboni doesn't sound so optimistic. "You cannot put all your eggs in one basket," he told
Bloomberg. "The board should be saying, 'What if these products don't pan out?' You don't want RIM to turn into another Nortel." A RIM spokeswoman, meanwhile, declined to comment on the letter.
AR, ON BEHALF OF SUPPORTIVE SHAREHOLDERS, REQUESTS RIM
DIRECTORS TO COMMENCE A VALUE MAXIMIZATION PROCESS THAT MAY
INCLUDE THE SALE OF RIM
TORONTO, CANADA – September 6, 2011 – Jaguar Financial Corporation (“Jaguar”) (TSX:
JFC), a shareholder of Research In Motion Limited (“RIM” or the “Company”), on behalf of
itself and other supportive shareholders, today called upon the Directors of RIM to establish and
carry out a formal process for the maximization of shareholder value. This value maximization
process would include the pursuit of all options including a potential sale of the Company or a
monetization of the RIM patent portfolio by a spin-out to RIM shareholders.
Vic Alboini, Chairman and CEO of Jaguar, stated: “The status quo is not acceptable, the
Company cannot sit still. It is time for transformational change. The Directors need to seize the
reins to maximize shareholder value before more market value is lost.”
Jaguar strongly recommends that RIM’s Directors appoint a Special Committee of the Board
consisting of four or five of the current seven independent directors to pursue a shareholder value
maximization process.
Jaguar believes a transformational change to maximize shareholder value is necessary for the
following reasons:
Poor Share Price Performance
There has been a precipitous decline in the Company’s share price since 2008, from $149.90 in
June 2008 to $29.59 on September 2, 2011, representing a decline of approximately 80.3%. In
contrast, over the same timeframe, the TSX Composite Index has only fallen by approximately
14.8%. RIM’s chronic underperformance and repeated delays in executing its strategy have led
Jaguar to the conclusion that fundamental change at RIM is required. Most importantly, RIM’s
competitors have seen a significant increase in market share at RIM’s expense, both in the
enterprise and consumer markets, and a corresponding increase in share price and overall
valuation.
Lack of Innovation Resulting in a Loss of Market Share
While its rivals have demonstrated an ability to develop and market products with features that
inspire consumer enthusiasm and drive higher adoption rates, RIM has clearly fallen short. Its
failure to offer products with innovative features, combined with its limited selection of
applications, has resulted in RIM losing market share to its competitors. While few would
question the email and security capabilities of RIM’s BlackBerry platform, the reality is that RIM has failed to develop the multi-purpose device that meets the requirements of today’s
dynamic consumer landscape.
The BlackBerry, once a market leader, has been relegated to number 3 in terms of market share
behind Apple’s iPhone and Google’s Android phones. A recent comScore report estimated that
RIM’s U.S. smartphone market share declined from 39% to 22% over the twelve month period
ended July 31, 2011. This decline in the Company’s standing can largely be attributed to
significant execution delays, inadequate mobile applications, and the lack of a competitive
product that addresses the needs of the consumer marketplace.
With a reduced market share for RIM there is the serious risk that developers of mobile
applications will prioritize developing applications for RIM’s competitors. There should be a
concerted focus for RIM to encourage or finance the development of cutting edge mobile
applications. This lack of an effective ecosystem is a key shortcoming that needs to be
addressed.
Jaguar has noted the recent resignations of several key RIM employees. The disruption to the
Company resulting from these departures could not have come at a more inopportune time. The
ongoing exodus of RIM’s human capital raises questions about RIM’s ability to inspire and
retain the talent that will be essential for RIM to regain its competitive standing.
Corporate Governance Concerns
Jaguar believes RIM’s current corporate structure, which includes Mr. James Balsillie and Mr.
Mike Lazaridis as Co-Chief Executive Officers and Co-Chairmen of the Company, is ineffective
and requires meaningful change. “Messrs. Balsillie and Lazaridis are first class entrepreneurs,
but the current management arrangement with the Board impedes the Board’s effectiveness, in
turn impacting RIM’s strategy, operations and performance”, stated Mr. Alboini.
At RIM’s most recent Annual General Meeting of shareholders, Northwest & Ethical
Investments L.P. (“Northwest”), an institutional shareholder, proposed that the role of Chief
Executive Officer and Chairman be divided and that RIM have an independent Chairman.
However, Northwest withdrew its proposal after reaching a compromise with RIM that Jaguar
believes is woefully inadequate.
RIM’s June 30, 2011 press release detailing the compromise outlined the formation of a
Committee of independent directors to “study” the issues, “determine the business necessity” for
Messrs. Balsillie and Lazaridis as Co-CEOs to have Board titles, “propose and provide a
rationale for a recommended governance structure for RIM” and to report by January 31, 2012.
Jaguar believes that this compromise clearly demonstrates the complacency that has led to the
Company’s downfall, as well as the disconnect between the Board and its shareholder base.
“These issues can easily be determined in seven hours rather than seven months, and the
solutions are obvious: one CEO and an independent Chairman” stated Mr. Alboini.
Recent Consolidation in the Mobile and Patent Spaces
Merger and acquisition activity has been prevalent in the technology industry recently,
particularly regarding intellectual property, as highlighted by Google Inc.’s $12.5 billion
proposed acquisition of Motorola Mobility Holdings, Inc.; Wi-LAN Inc.’s $480 million offer to acquire MOSAID Technologies Incorporated and the recent $4.5 billion acquisition of Nortel’s
patents by a consortium of six companies including RIM.
On July 19, 2011 InterDigital, Inc. put itself up for sale, and the driving reason, as astutely
articulated by the Chairman of InterDigital, was the recognition by major players in the mobile
industry that the value of patent portfolios has increased substantially. The share price of
InterDigital increased from $41.51 the day before the announcement of the value maximization
strategy to the current price of $68.39.
In addition, Eastman Kodak Company announced on July 20, 2011 a value maximization
strategy related to its digital imaging patent portfolios, a move it described as “reflecting the
current heightened market demand for intellectual property.” Kodak stated “we believe the time
is right to explore smart, opportunistic alternatives for our digital imaging patent portfolios.”
Kodak shares increased from $2.31, the day before the announcement, to the current price level
of $3.24.
Finally, the announcement on September 1, 2011 of MOSAID’s acquisition of 2,000 wireless
patents and patent applications originally filed by Nokia further demonstrates the technology
industry’s intensified interest in intellectual property.
With its own stock of coveted patents, RIM is positioned to benefit from the increased appetite
for intellectual property, but the Board must change course and recognize the opportunity. RIM’s
Directors must seize the reins, take note of recent merger and acquisition developments, and
pursue a strategy that maximizes RIM’s value.
Without the commencement of a formal value maximization process, there is the potential for a
serious loss of shareholder value. Jaguar believes now is the time to commence a formal value
creation process.
RIM Shareholders
Any RIM shareholders who wish to support Jaguar in its efforts to encourage the RIM Board to
begin a value maximization process can contact Jaguar at 416-363-1124 or by e-mail
info@jaguarfinancial.ca.
About Jaguar
Jaguar is a Canadian merchant bank which invests in underperforming, undervalued or
unappreciated companies and acts as a catalyst to create value. Jaguar’s track record includes
the following gross annualized gains: Century II Holdings Inc. (134%); HudBay Minerals Inc.
(105%); Kinbauri Gold Corp. (113%); RAND A Technology Corporation (25%); and Virtek
Vision International Inc. (46%).
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this
news release. This press release may contain forward-looking statements with respect to the
Company, its operations, strategy, financial performance and condition. These statements
generally can be identified by use of forward looking words such as “may”, “will”, “expect”,
“estimate”, “anticipate”, intends”, “believe” or “continue” or the negative thereof or similar
variations. The actual results and performance of the Company discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in
their entirety by the inherent risks and uncertainties surrounding future expectations. Important
factors that could cause actual results to differ materially from expectations include, among
other things, general economic and market factors, and competition. The cautionary statements
qualify all forward-looking statements attributable to the Company and persons acting on their
behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this
press release and the Company has no obligation to update such statements.
For additional information on this press release, please contact:
Vic Alboini, Chairman & Chief Executive Officer
416.644.8110
valboini@northernsi.com
- or -
Kyler Wells, General Counsel & Corporate Secretary
416.644.8177
kwells@northernsi.com
