Research In Motion to Repurchase Shares Following Stock Selloff

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Research In Motion (RIM) announced a stock buyback program following the loss of one-third of the company's value in the past six weeks. The company's board of directors approved a plan that will take up to US$1.2 billion in company resources to repurchase as much as 21 million common shares at today's price.

RIM's stock was hit by a selloff following its earnings report for the August quarter of 2009. The stock hit a high of $88.08 per share prior to its August quarter announcement in September, but those results were considered disappointing in terms of revenue and earnings, and RIM warned that pricing would be weaker in the November quarter.

RIM's dominant BlackBerry smartphone has been under pressure from Apple's popular iPhone, and the market has expressed concern over new pressure from Google's Android platform, especially Verizon's decision to heavily promote the Motorola Droid, as noted by MarketWatch.

In a statement, the company said, "RIM's Board of Directors believes that a share repurchase program at this time is in the best interests of RIM and its shareholders, and will not impact RIM's ability to execute its growth plans given the strength of RIM's balance sheet and expected cash flow generation over the next several quarters. Any shares purchased under the program will increase the proportionate interest of, and may be advantageous to, all remaining shareholders of RIM."

Today RIM's stock showed a slight gain, closing at $57.79 per share, a gain of $.18 (+0.31%), on moderate volume of 20.3 million shares trading hands.

Shares in AAPL also gained, with the stock closing at $194.0301 per share, a gain of $3.2201 (+1.69%), on very light volume of 13.6 million shares trading hands.

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Comments

Bryan Chaffin

RIM is still #1 in the U.S. with the BlackBerry, but the market has punished the company, even while rewarding Apple.

And, as I noted in the IDC piece, Android is right going to sneak up and overtake BlackBerry, sooner or later.

deasys

That action smells of desperation. That’s the wrong thing to do with corporate financial resources. It looks like they’ve lost confidence in their ability to compete.

WetcoastBob

Smart Move!  This allows more control by RIM and less by shareholders.  RIM will be able to operate in a more adventurous and innovative environment.

Apple and its iPhone need strong competition to stay on top of the market.  RIM will provide this.

Shareholders are only interested in immediate ROI.

wab95

Apple and its iPhone need strong competition to stay on top of the market.? RIM will provide this.

In principle, I concur. However, RIM have stayed too long with an outmoded business plan and have become a de facto niche player. Beyond email, in what other context does anyone think of a Blackberry? Currently the iPhone and Droid have are perceived as exploiting all the other communications and networking media available; although even here the iPhone is buttressed by the App Store and iTunes, which puts the device in a league all its own.

RIM will no doubt battle gallantly onward to hold onto its largely corporate market share, and I wish them well, because yes, Apple needs a competitor. It is unclear whether RIM can sufficiently reinvent itself to stay relevant as demand continues to evolve for greater functionality. More importantly, its corporate stronghold is already breached by Apple’s strength in the consumer market, which has been porting the iPhone to the workplace. Whether the iPhone ever becomes a common corporate choice is almost irrelevant. It doesn’t have to, anymore than the Mac does to affect the corporate space, although I suspect Apple would not mind if it did.

I am inclined to agree with Brian Chaffin that it may come down to Apple vs Android in a brave new world, but for Android to compete with Apple, it’s going to have to make substantial inroads with apps and music - oh wait - books on the iTablet? Here’s to hoping Android can keep up.

wab95

I am inclined to agree with Brian Chaffin

Sorry, Bryan, typo…

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