Research In Motion (RIMM) Buyout Coming?

| April 11, 2012

It’s no secret the maker of the BlackBerry smartphone has been stuck in a downward spiral.  However, there still may be a way to profit on Research In Motion (RIMM).  I’ll explain exactly how to do it in a moment.

But first, let’s recap what’s happened to the former high-flier…

Shares of RIMM have plummeted from more than $145 per share in 2008 to around $13 today.  A massive destruction of wealth for those unfortunate investors who bought the stock at its peak.

The decline started with the credit crisis and the ensuing recession in 2008.  And it accelerated in 2011 when falling sales led to shrinking revenue for the first time in nearly a decade.

And despite the company’s best efforts, RIMM hasn’t been able to stem the tide.

Quite simply, RIMM has been knocked out by two of tech’s heaviest heavyweights… Apple (AAPL) and Google (GOOG).  It’s a losing battle everyone but RIMM’s management and the most dedicated ‘crack-berry’ enthusiasts saw coming.

RIMM has lost a huge amount of market share to Apple’s iPhone and Google’s Android smartphones.  BlackBerrys make up a mere 10% of US smartphones.  Far behind Android’s 53% and Apple’s 29% market share.

What’s more, RIMM’s average sales prices, profit margins, and units sold are all falling.

Simply put, RIMM is a failing business.  They’ve lost the war with iPhone and Android over the smartphone market.

Of course, it finally caught up to former co-CEOs Jim Balsillie and Mike Lazaridis who were fired… I mean, “stepped down” earlier this year.  But by then, the damage had been done.

Now, new CEO Thorsten Heins is looking into ‘strategic alternatives’ to revive the struggling business.

That’s music to my ears…

You see, strategic alternatives simply mean RIMM is looking to sell.  And they own a number of patents that could be worth billions.

Get this…

Last year, Google agreed to pay $40 per share for Motorola Mobility (MMI) to get its hands on the company’s huge patent portfolio.  It was a 63% premium to MMI’s closing price the day before the buyout was announced.

And earlier this week, Microsoft (MSFT) paid $1 billion to get their hands on 800 of AOL’s (AOL) patents.  A clear indication the market for patents is as hot as ever.

I think we could see a similar deal for RIMM’s patents.  And at the rate things are falling apart at RIMM, it will likely happen sometime this year.

Buying cheap out-of-the-money call options on RIMM is an easy way to speculate on a buyout.  Take a look at buying calls at least three months out, trading for under $0.50, and with a strike below $20.  If RIMM gets bought out, you’ll be sitting pretty.

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Category: Options Trading

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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