EP Award Promo

BERKO: Big losses for RIMM shareholder


Dear Mr. Berko:

I made a huge mistake taking your advice to buy 200 shares of Research In Motion that you strongly recommended in your column at $128 shortly after its 3-for-1 split in 2007. And now the stock is selling for $11. How can you have been so wrong, and during the following five years as the stock collapsed, never recommended the stock be sold? I’ve lost $23,000 in my IRA, which is about 25 percent of the account. While I blame you for this loss, I blame myself most for following your stupid advice, even though you meant well. Now please tell me what to do. I still own the stock, and I need to know if I should average down or sell my 200 shares and take my losses. And this time, how about putting some thought into your answer to me.

T.G., Bethlehem, Pa.

Dear T.G.:

Ouch, that’s got to hurt. It’s going to take you a long time to earn back that $23,000, but if it makes you feel any better, I’m also sorry for your loss – but not nearly as sorry as you. However, you’ve got a case of mistaken identity and have me confused with Credit Suisse, Oppenheimer, Citigroup and others who, because of proprietary interests, may have been pushing Research In Motion Ltd. (RIMM-$7.51). I’ve never written a paragraph about RIMM and have never discussed it in my emails or written correspondence. Even though RIMM was an explosive performer between 2003 and 2008, I never recommend stocks that float at cloud-level price-earnings ratios (300 times earnings), which is like skydiving without a parachute. So I accept your apology in absentia, because I know even you “meant well.” But why did you continue to hold RIMM and watch it fall over 117 points from your purchase price? That’s industrial-strength dumb. And why would you invest 40 percent of your IRA money in a single stock that’s as volatile as a volcano? That’s industrial-strength stupid.

RIMM has been hurt by competition from Apple’s iPhone and smartphones running Google’s Android operating system. However, it seems that BlackBerry users have become a huge vocal cult, remaining loyal to RIMM and still requesting more devices. And RIMM’s new CEO is in a constant lather, working on various alternatives to save the BlackBerry maker. So far, management has three options: (1) If RIMM’s new QNX-based mobile platform is a hit, it might buy the company additional time to make RIMM more valuable as an acquisition candidate. However, I heard that the QNX system may be a little complicated and that MIT and Georgia Tech may offer courses to help beginners navigate the keyboard. Observers believe there is a 70 percent probability for this. (2) RIMM CEO Thorsten Heins (not the scion of H J) is looking for a partner. We know that late last year and early this year, RIMM has talked with China’s HTC (High Tech Computer Corp.) and Samsung Electronics about licensing. Nothing has happened so far. Meanwhile, other partners could include some of the major carriers. Some say this is a 50-50 possibility. And option (3) is selling the company. I’m told that Steve Ballmer of Microsoft has discussed the purchase of RIMM with board members, and it’s rumored that Finland’s Nokia (which really needs a shot in the arm) has expressed an interest. Then there’s Amazon.com, which recently jumped into the tablet business. However, with a market cap of nearly $6 billion, RIMM is still a big bite. Other suitors are circling the wagons.

RIMM, which has no debt, may be an interesting gamble at $7.51. It has about $3 billion in patents, which contribute to the company’s book value of $20 a share. BlackBerry is still the gold standard for many corporate markets where premium security is valued, and it should retain this position. And to my surprise, its QNX operating system has received kudos from industry observers. The best recommendation I can give you is to keep your 200 shares and spend Sundays in the amen corner of your church.

dentons brweb 090123 300x250