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RIM's Stock Falls Below Book Value

Research In Motion Ltd. (RIMM)’s decline below book value for the first time in nine years leaves the BlackBerry maker worth less than the net value of its property, patents and other assets in a sign of investors’ lowered faith. They’ve been losing business, there’ve been operating technology problems. There isn’t a lot of customer loyalty anymore. RIM fell 2.9 percent to $18.37 at 10:27 a.m. New York time, trailing the book value of $18.92 a share at the end of last quarter, according to data compiled by Bloomberg. The measure comprises a company’s assets including cash, inventories, real estate and intellectual property minus its liabilities. The company helped create the smartphone market a decade ago with its first e-mail device and now must compete against Apple Inc. (AAPL) and devices that run Google Inc. (GOOG)’s Android software. The market-share decline has put pressure on RIM to shake up management, and investors such as Jaguar Financial Corp. (JFC) have called for RIM to divide split up, seek a merger or sell itself. “The market, at book value, seems to be saying not only is RIM going to not get bigger in the future, but it’s actually going to shrink,” said Richard Fogler, of Kingwest & Co. in Toronto, who personally manages about C$1.5 billion. He sold his RIM shares in the third quarter. “Everyone’s frightened of what’s going to keep happening tomorrow.” RIM last traded below book value in 2002, when it was losing money. The company earned $329 million, the least in four years, in the quarter ended in August. RIM shares peaked at 24.3 times book value in November 2007. The Waterloo, Ontario-based company’s U.S. market share sank to 9.2 percent in the third quarter from 24 percent a year earlier as consumers opted for Apple’s iPhone and Android phones from Samsung Electronics Co. and HTC Corp. (2498), according to research firm Canalys. ‘No Faith’ RIM posted its first quarterly revenue decline in nine years in September and is struggling to move its BlackBerry lineup onto a new operating system and reignite interest in its PlayBook tablet computer. The PlayBook went on sale in April without dedicated e-mail, stirring criticism that RIM said it would remedy this summer. RIM last month said that e-mail software upgrade won’t come until February. “The market has no faith in its current model, that is what the market is telling you,” said Neeraj Monga, an analyst at Veritas Investment Research Corp. in Toronto. Monga, who has a “sell” rating on RIM, says there’s a 50 percent chance the stock will drop below $10 within 12 months. The stock had already dropped 67 percent this year before today, cutting RIM’s market value to $9.91 billion. RIM had a book value of $9.92 billion on Aug. 27, the end of its most recent quarter. Major investors who have sold all their shares in recent months include Brookside Capital Investors Inc., Greystone Managed Investments Inc., Janus Capital Management LLC and Montrusco Bolton Investments Inc., according to Bloomberg data.

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