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Jaguar Is Ready to Pounce on RIM

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This just in: Some Research In Motion (Nasdaq: RIMM  ) investors are not happy.

OK, so that's not exactly news. The BlackBerry maker's share price has fallen 58% year to date, and the company has agreed to look at its convoluted management structure on request from irate shareholders. But the calls for drastic action are only growing louder.

Citing poor investment returns, lack of innovation, a terrible management structure, and a rapidly consolidating industry, activist investor firm Jaguar Financial recently asked for a quicker shakeup. RIM management's current promise of a report next January to address some of these issues isn't good enough when Apple (Nasdaq: AAPL  ) , Google (Nasdaq: GOOG  ) , and even Nokia (NYSE: NOK  ) are moving much faster. Cupertino and the Android army have been eating the BlackBerry slice of the mobile pie for years, and the Finns are at least willing to take drastic action to overcome a sliding market share. If you run with the bulls, you'd better wear running shoes. But RIM is stuck in a pair of outdated cement boots.

And now, Jaguar claims to have support for its battle cry from 8% of RIM investors. The firm expects to have 12% of shareholders on board before too long. These measures seem popular with shareholders at large, as the stock has gained 15% since the Jaguar pounce, including a 4.5% jump on today's news of wider support.

It seems obvious that RIM would benefit from a severe shakeup. Co-CEOs Balsillie and Lazaridis also share the chairman's post on the board of directors, giving them pretty much unlimited power to run the company whatever way they wish. Since Apple introduced the first iPhone, that direction has been a long, slow train wreck.

Sure, the unit volume of BlackBerrys shipped keeps on rising, but at what cost? Gross margins are dipping, revenue growth is slowing down, and profits are actually shrinking. Most damning of all, RIM's operating cash flows are crashing hard while capital expenses skyrocket -- the company burned more than $300 million of free cash last quarter. All told, RIM reduced its cash hoard by half in just three months.

If I were a RIM shareholder, I'd be angry, too. Promising to consider some change is a far cry from taking action, especially when the people in the shakeup crosshairs also are ultimately responsible for planning and then making the change.

Activist investors like Jaguar don't always get their way, but they cannot be ignored. You may recall how Walt Disney (NYSE: DIS  ) CEO Michael Eisner resisted many cries for change before being forced out by a murderous shareholder vote. Since Bob Iger took the wheel almost exactly six years ago, the House of Mouse has crushed the Dow Jones (INDEX: ^DJI) with bold moves like the acquisitions of Pixar and Marvel.

That's the magnitude of change RIM needs today. Unless Jaguar can force the company into a whole new direction, there are many better buys in the mobile industry today. Will the activists make it happen? Add Research In Motion to your Foolish watchlist and stay tuned -- you'll be the first to know.

Fool contributor Anders Bylund owns shares of Google but holds no other position in any of the companies discussed here. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Walt Disney, Google, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.

Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 11, 2011, at 9:42 PM, MINNION wrote:

    Rimm Management refused to tlak to CNBC today, even though they were told of Jauguar spokesperson being on the show.

    That shows that they are totally going to ignore any suggestion Jaguar Financial is going to make. They are NOT going to split the company in three as per JF request.

    Deal or No Deal?

    Rimm Ceo holds the breifcase.

  • Report this Comment On October 12, 2011, at 1:00 PM, BR14 wrote:

    Splitting the company is completely stupid. Jaguar may be investors but they clearly have no clue about technology.

    And RIM"s cash reduced because they spent a fortune buying patents - so their balance sheet should show a healthy uptick on assets.

    RIM certainly could use a management shake up, but dumping one or both of the CEO's isn't going to make much difference short term.

  • Report this Comment On October 12, 2011, at 1:09 PM, Winfield31 wrote:

    And the activist should be pouncing on this. I think Ichan and Whitworth get a bad wrap when they come to the rescue for things going a wry

  • Report this Comment On October 12, 2011, at 4:06 PM, baldheadeddork wrote:

    "Since Bob Iger took the wheel almost exactly six years ago, the House of Mouse has crushed the Dow Jones (INDEX: ^DJI) with bold moves like the acquisitions of Pixar and Marvel."

    Disney share performance under Eiger: +4%/year

    Disney share performance under Eisner: +15%/year - for two decades.

    (Both numbers excluding dividends.)

    Bob Eiger has done an acceptable job, but the Disney CEO who crushed the Dow (and the rest of the market) was the guy they fired in 2005.

    Not saying that RIMM's managers deserve to be spared, but Disney isn't a great example of activist investors getting it right.

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