Worse not worst

Worse is still to come for Research In Motion. After losing $70 billion of market value in less than four years, the BlackBerry maker’s latest results horrified again. The next iteration of its devices or a sale might provide salvation. But those seem like longshots.

The 25 per cent decline in revenue from this time last year and $125-million loss in the most recent quarter are bad - but it’s even uglier than it looks. Sales are shifting from the United States to lower-margin markets overseas. A promised new operating system isn’t due till the end of the year, meaning sales in coming quarters probably will suffer, too, as potential customers wait or buy a rival phone. And RIM now concedes revenue from its lucrative services business could fall as prices shrink and high-end customers switch off.

The stress is even starting to show on the company’s once rock-solid balance sheet. Inventories increased more than 15 per cent from the previous quarter to over $1 billion. That’s an alarming trend with sales falling. RIM also has written down the value of tablet devices and taken a $267 million charge for phones running its latest operating system. More such charges could be on the way.

At this point, RIM has two hopes. The BlackBerry 10 operating system might make its phones more desirable. But it already has been delayed by many months. Each day that passes further entrenches Android and iPhone ecosystems among software developers and users.

New Chief Executive Thorsten Heins has also left the door open to a sale. Microsoft’s joint venture with Nokia and Google’s ownership of Android mean there’s no natural buyer for RIM, especially at the current $7 billion value, let alone at a premium.

RIM may have $2 billion of cash and, according to analysts at Goldman Sachs, some $2 billion of discounted cashflow and patents worth some $3 billion. But the present value estimate is declining and the patent figure reflects heady prices from last year’s frenzy, so may well be too rich. Without any obvious sale options or paths to growth, shareholders will probably just continue to watch RIM melt before their eyes.