RIM could do better as two businesses: analyst

Tue Jul 12, 2011 1:45pm EDT
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TORONTO (Reuters) - BlackBerry maker Research In Motion should split itself in two to liberate locked-in value and speed up innovation at a company that has lagged its competitors, a brokerage said on Tuesday.

Shares of the Canadian technology giant have withered in recent months as it lost market share, particularly in North America, to Apple's iPhone and devices powered by Google's Android operating system.

The call by RBC Capital Markets comes hours before RIM's annual shareholder meeting at its hometown of Waterloo, Ontario. Investors are eager for news about how it intends to reverse its sagging fortunes.

Its share price -- down more than 50 percent this year -- has led to calls for management change and suggestions RIM could become a takeover target.

"RIM's organization, like its handsets, needs modernization," RBC's Mike Abramsky said in a note to clients. "Splitting RIM into network and handset businesses may accelerate innovation and unlock significant shareholder value."

An activist shareholder had sought a vote at the AGM to force co-founder Mike Lazaridis and his co-chief executive Jim Balsillie to relinquish their other shared role as board chairman. RIM has promised to study the issue and the shareholder dropped the proposal.

Even so, before it was dropped the proposal had won the support of two influential proxy firms that advise shareholders, as well as the backing of several major investors.

RIM has reacted slowly to a changed landscape in which applications such as games and video play a larger role in how consumers choose a smartphone. In addition, major companies are now allowing their employees to use their personal phones to access work systems, a blow to RIM's once-dominant position in the so-called enterprise market.

The company's profit fell last quarter and it warns of more pain ahead as it moves its smartphones to a new QNX platform by early next year. The software, which RIM bought in 2010, was introduced in the company's new PlayBook tablet in April.   Continued...

<p>A person poses while using a Blackberry Bold 2 smartphone made by Research in Motion (RIM), July 13, 2010. The company will hold its annual general meeting of shareholders today. REUTERS/Mark Blinch</p>