Help Wanted: Research in Motion Bulls, Apply Within
The idea that RIM sports a comfortable cash position is nothing short of misleading.
Consider the company's inventory writedown history.
In December, RIM took a $485 million charge to account for PlayBook inventory. Then, in March, it penciled in a $267 million ding for unsold BlackBerries. And, as Bloomberg Businessweek first pointed out , RIM's inventories continue to surge, making yet another writedown a very real possibility.
I doubled-checked Bloomberg's work. It's true. Inventories swelled to $1.3 billion, as of the end of March 2012, up from $618 million the year prior. Once unwanted PlayBooks and BlackBerries not in RIM warehouses but collecting dust on retail shelves across the globe get factored in, expect that number to rise.
It would be fantastic if the $2 billion or so RIM reports in cash, cash equivalents and short- and long-term investments signaled a healthy business. That might warrant a modicum of bullish excitement. However, a slightly deeper look reveals that RIM might as well be bleeding cash.
What good is a business flush with cash when it sits on hundreds of millions of dollars, if not billions, worth of inventory it probably will not be able to unload? There's no turnaround in progress. Not even close. And, as I argue while making the bull case for Nokia(NOK) , RIM's long period of denial -- under Jim Balsillie and Mike Lazaridis's watch -- prevented it from forging key partnerships when there might have been companies actually willing to talk.
RIM should have abandoned the BlackBerry OS like Nokia did Symbian. It should have taken a page out of the epic turnaround at Domino's Pizza (DPZ) and said, "We stink. We're sorry. We'll change. We'll try harder."
Instead of owning up to failure, Balsillie went the opposite direction. I'm not sure he had it in him to concede one bit. And that's why he's gone. There was no other choice.
Now, Thorsten Heins takes on the impossible task of picking up the pieces. He has a better chance of remedying Balsillie's other national failure by bringing an NHL franchise to Southern Ontario. RIM is a lost cause.
BGC Partners analyst Colin Gillis said it best, telling The Wall Street Journal : "This isn't really a transition yet. This is really just a downward slide."
A tip of the tuque also goes to TheStreet's Richard Saintvilus who put it so well hours before RIM even released its sour update: Touching RIM at this point requires not only the use of surgical gloves, but appreciating the old adage that says "stupid is as stupid does."