Research in Motion (Nasdaq: RIMM), Struggling, Ponders a Dim Future

Orlando, FL 6/1/12 (StreetBeat) -- After rejecting the idea of a sale for months, Research in Motion (Nasdaq: RIMM) acknowledged on Tuesday that it was considering "strategic business model alternatives" - or in banker's speak, RIM, which makes the BlackBerry, said it was pondering a potential deal for all or parts of the company.

But did it wait too long?

A year ago, RIM, a Canadian company, became the subject of takeover rumors, after Google’s (Nasdaq: GOOG) $12.5 billion deal for Motorola Mobility. Then, analysts believed that RIM would draw interest from Microsoft (Nasdaq: MSFT), Amazon.com (Nasdaq: AMZN) or any number of Chinese phone manufacturers who could afford what would have been a pricey deal.

The company's executives rebuffed the idea, arguing that RIM was on the verge of a turnaround. New phones were coming that combined touch-screens with BlackBerry's e-mail and security features. And the PlayBook, with an industrial-strength operating system, could stand toe to toe with the iPad.

But RIM's prospects have withered since. In March, the company disclosed that its quarterly sales had plunged 20 percent from the previous quarter, as customers migrated to iPhones and Android devices. The company warned on Tuesday that it expected another loss.

The weakness is reflected in the stock's sharp decline. RIM's market value is just $5.4 billion, down roughly 76 percent from a year ago. Its share price fell slightly on Thursday, to $10.33.

"Buying this stock is like going to the casino," analysts at National Bank Financial wrote in a research note on Wednesday.

Now, executives appear to be reluctantly admitting they need to make a change. On Tuesday, the company said that it is conducting a strategic review. As part of its effort, RIM tapped JPMorgan Chase (NYSE: JPM) and RBC Capital Markets to help assess its potential options.

Those efforts may not lead to a sale, but instead partnerships with other companies or the licensing of BlackBerry software. Earlier this year, RIM's chief executive, Thorsten Heins, disavowed any need to consider "drastic change."

Ehud Gelblum, an analyst at Morgan Stanley, wrote in a note - entitled "No Happy Ending in Sight" - on Wednesday that he did not believe RIM was seeking to sell itself as a whole, but may consider outsourcing its network operating center or selling off parts.

That may be the best option. Earlier this year, the sales prospects for RIM did not look promising. A few analysts believed that RIM did not have "much to offer" a potential buyer.

The company's prospects may have deteriorated in the intervening months. Some analysts indicate that RIM may only be worth the total value of its patents and its cash, roughly $1.8 billion. It is unclear what the patents may fetch, though analysts at Jefferies estimated last fall that the intellectual property could bring $1 billion to $2.5 billion.

Should RIM put itself on the auction block, it may find the universe of potential buyers remains fairly small. Microsoft, long considered a possible suitor, has been focused on its new Windows operating system and its tie-up with Nokia. Amazon.com has cast its lot with a version of Google's Android. And buyers in China and India may face complaints from important BlackBerry customers like the United States and Canadian governments.

And patience isn't necessarily a virtue in deal-making.

Take Yahoo (Nasdaq: YHOO), which Microsoft offered to buy for nearly $45 billion in 2008. The talks quickly cratered, and a deal never panned out. Yahoo has since run through three chief executives and cast about for a new business model.

It has agreed to sell about half of its stake in the Alibaba Group of China, a move that will generate cash that can be paid out to investors. And it has revamped its board.

But it is unclear whether such efforts will make up for Yahoo's 58 percent drop in value since Microsoft's takeover attempt.

Then there is Palm Inc., which is often compared with RIM at this stage. Having failed to gain traction with a series of devices built on its own smartphone operating system, the company began a sales process several years ago, drawing in five bids.

One suitor, Hewlett-Packard (NYSE: HP), was pressured into raising its offer by 20 percent, and ultimately paid $1.2 billion to win the bidding. The deal represented a 23 percent premium to the smartphone maker's closing price from the day before the offer was announced in 2010. Yet by that point, Palm's stock price had dropped 50 percent over the previous 12 months.

Still, there's some hope left for RIM. Motorola Mobility had largely been left for dead by August 2011, trailing Samsung and H.T.C. in the race for Android device dominance. Then Android's creator, Google itself, arrived with a bid carrying a whopping 63 percent premium, spurred by the valuable patents that Motorola held.

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Hewlett Packard (NYSE: HPQ) to lay off 27,000, profit slides 31 percent

Orlando, FL 5/24/12 (StreetBeat) -- Hewlett Packard Co (NYSE: HPQ) plans to lay off roughly 27,000 employees or about 8 percent of its workforce over the next couple of years to jumpstart growth and save up to $3.5 billion annually, sending its shares 11 percent higher.

The company said the layoffs would be made mainly through early retirement and would generate annual savings of $3 billion to $3.5 billion as it exits fiscal year 2014, when the layoffs are expected to the completed.

The world's No. 1 personal computer maker, which employs more than 300,000 people globally, also said on Wednesday that it had a 31 percent decline in second-quarter profit and a 3 percent decline in revenue, compared with a year ago.

The results, however, were better than Wall Street expectations.

Layoffs "adversely impact people's lives, but in this case, they are absolutely critical to the long-term health of the company," Chief Executive Meg Whitman said.

"This is broad based," she said in an interview. "By design, it will touch all of HP."

Whitman said a third of the layoffs would be in the United States. The company will take a pretax charge of $1.7 billion in fiscal 2012 related to the layoffs.

Whitman plans to boost spending on research and development, especially in printing and PCs, with the savings from the cost cuts.

Sterne Agee analyst Shaw Wu said the quarter was surprisingly strong for HP, which had missed its own forecast most quarters in the last 18 months and prior to Whitman taking over as CEO.

"Everyone expected a miss, given what Dell said," Wu said. "It looks like HP is regaining its footing."

Dell (Nasdaq: DELL) shares on Wednesday plunged 17 percent following weaker than expected results and a disappointing revenue forecast spurred fears that global tech spending is weakening faster than anticipated.

HP itself has been trying to move past the internal upheaval that marked 2011, including the departure of two chief executives.

Whitman, a veteran Silicon Valley executive who took the top job last September, has been trying to turn the company around.

Whitman said both business leaders and consumers in Europe were worried about the region's economy, which is hurting HP's business. She warned that the European debt crisis was a big "headwind" the company was facing.

HP reported second-quarter net income of $1.59 billion, or 80 cents a share, compared with $2.3 billion, or $1.05 a share, a year ago. Revenue of $30.69 billion was down 3 percent compared with the same period last year.

Excluding after-tax costs for amortization, restructuring charges and acquisition-related charges, HP said it earned 98 cents a share, compared with analysts' average estimate of 91 cents, according to Thomson Reuters I/B/E/S.

TABLET LAUNCH FOR HOLIDAY

Whitman, who has been at the helm for six months, said the company also plans to launch tablets -- for both consumers and corporations -- later this year.

"We will have a Windows 8 tablet for the holiday," she said.

This would be HP's second attempt in the tablet market. HP killed its previous WebOS-based TouchPad tablet last year after just seven weeks on store shelves, citing poor demand.

Whitman also said HP's acquisition of British software company Autonomy for over $11 billion is facing challenges, and results in the division fell short of HP's expectations.

HP has moved the division under its chief strategy officer Bill Veghte. Autonomy founder Mike Lynch will be leaving the company.

Results from HP's other divisions were also weak.

Sales from the personal systems group, encompassing PCs, were flat with a decline in sales to consumers offsetting revenue from commercial clients.

Revenue from its bread-and-better printing group, which is being merged with the PC group, fell 10 percent after weak consumer and corporate demand.

"We improved the channel inventory to within an acceptable range," Whitman said on a conference call, referring to the printing group. "However, we continue to face a weak demand environment."

Sales of enterprise servers, storage and networking equipment fell 6 percent.

HP shares rose to $22.35 after hours after ending down 3.2 percent at $21.08.

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Dell (Nasdaq: DELL) shares fall on disappointing results

Palm Beach, FL 5/23/12 (StreetBeat) -- Shares of Dell Inc. (Nasdaq: DELL) tumbled late Tuesday after the computer maker posted quarterly results that fell below expectations, with the company’s chief financial officer pointing to challenges in its business.

Dell (Nasdaq: DELL -16.84%) was down more than 12% after hours.

The company reported a fiscal first-quarter profit of $635 million, or 36 cents a share, compared with a profit of $945 million or 49 cents a share for the year-earlier period.

Revenue was $14.4 billion, down from $15 billion. Adjusted profit was 43 cents a share.

Analysts were expecting the Round Rock, Texas-based Dell to report a profit of 46 cents a share on revenue of $14.9 billion, based on a consensus survey by FactSet Research.

For the current quarter, Dell said it expects revenue to rise sequentially by 2% to 4%, which translates to a range of $14.7 billion to $15 billion.

Analysts were expecting sales of $15.4 billion, according to data from FactSet Research.

The company’s weak outlook appeared to have an impact on shares of rival Hewlett-Packard Co. (NYSE: HPQ -4.58%), which reports results on Wednesday. H-P’s stock was down more than 2% at last check.

Brian Gladden, the chief financial officer, said Dell had a “mixed quarter,” noting gains in the data storage, networking and services businesses.
However, he added: “The consumer business has become a bit more challenging.”

Gladden also pointed to changes in the consumer market, particularly the shift from laptops to smartphones and tablets. “Consumers today have other options in terms of alternative mobile devices.”

Analysts have noted how the rise of mobile devices hurts PC sales. Dell, for its part, has been pushing harder to expand its presence in higher-margin segments of the tech industry geared to corporate customers. But the company also has been buffeted by macroeconomic issues, including the crisis in Europe and weaker public-sector spending.

“Nasty” was how ISI analyst Brian Marshall described Dell’s results, adding that “I am sure they will have to lower expectations.”

Sterne Agee analyst Shaw Wu said the company had a “disappointing quarter despite low expectations. … It looks like the turnaround efforts the company is making is taking longer than expected.”

Please contact www.thestreetbeat.com for interest in our latest investor relations platform the “CEO Interview Series” with its host Steve Kanaval. The package includes a one-on-one interview with a seasoned industry professional; published segment to our web site with embedded audio/video file; and a compressed file that can be easily e-mailed out to your current and/or potential investors. Please e-mail bflautt@gmail.com or call (662) 392-0740 for pricing and scheduling.

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Facebook gearing up for 2012 IPO

Palm Beach, FL 11/29/11 (StreetBeat) --Facebook, the world's largest Internet social network, is preparing for a initial public stock offering next year, according to a source familiar with the matter.

Facebook is exploring raising $10 billion, the Wall Street Journal said on Monday. It hopes the offering will value the company at more than $100 billion, according to WSJ, which first reported the story. Facebook's Chief Financial Officer, David Ebersman, had discussed a public float with Silicon Valley bankers but founder and Chief Executive Officer Mark Zuckerberg had not decided on any terms and his plans could change, the Journal said.

The social network, which now claims more than 800 million members after seven years of explosive growth, has not selected bankers to manage what would be a very closely watched IPO. But it had drafted an internal prospectus and was ready at any moment to pull the IPO trigger, the Journal cited people familiar with the matter as saying.

At $100 billion valuation, the company started by Zuckerberg in a Harvard dorm room would have double the valuation of Hewlett-Packard, the Journal said. A formal S-1 filing could come before the end of the year, though nothing was decided, the newspaper added. A Facebook representative declined to comment.

Silicon Valley start-ups have this year begun to test investor appetite for a new wave of dotcoms. If it does debut in 2012, Facebook's IPO would dwarf that of any other dotcom waiting to go public.

"Farmville" creator Zynga has filed for an IPO of up to $1 billion. In November, daily deals service Groupon debuted with much fanfare, only to plunge below its IPO price within weeks. LinkedIn and Pandora are now also trading significantly below the levels their stocks reached during their public debuts earlier this year.

Facebook has become one of the world's most popular Web destinations, challenging established companies such as Google Inc and Yahoo Inc for consumers' online time and for advertising dollars. Facebook does not disclose its financial results, but a source familiar with the situation told Reuters earlier this year that the company's revenue in the first six months of 2011 doubled year-on-year to $1.6 billion.

Eric Feng, a former partner at venture capital firm Kleiner Perkins Caufield & Byers who now runs social-networking site Erly.com, said that the cash Facebook will get in an IPO would allow them to make more acquisitions and refine or work on new projects, such as a rumored-Facebook phone or a netbook.

Having tradeable stock will also allow Facebook to attract more engineering talent who might have been more attracted to the company in earlier days when it was growing faster but now perhaps might be attracted to other companies. "It'll be a powerful bullet for them," said Feng.

Investors have been increasingly eager to buy shares of Facebook and other fast-growing but privately-held Internet social networking companies on special, secondary-market exchanges. Facebook said in January that it will exceed 500 shareholders this year, and that in accordance with SEC regulations, it will file public financial reports no later than April 30, 2012.

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