This just in: Some Research In Motion
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
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
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.