Back in the 1980s, Carl Icahn was known as a corporate raider. He would target troubled companies and try to force an outcome such as a going-private transaction, a huge dividend or a merger.
Icahn now calls himself an “activist investor” but his approach hasn’t changed much. And he still has no trouble finding companies to agitate. So it makes sense that there is buzz that he has taken a hefty position in troubled tech company Research In Motion (Nasdaq:RIMM).
RIMM’s BlackBerry smartphone looks like a technological museum piece. Apple’s (Nasdaq:AAPL) iPhone and iPad continue to take market share in the premium market, while Google’s (Nasdaq:GOOG) Android is cleaning up on the low end. In fact, now Amazon.com (Nasdaq:AMZN) is poised to make inroads with its highly-anticipated Kindle Fire tablet.
Despite all this, RIM does have some hope. In the corporate market, the company still has entrenched customers. They realize the value of strong security and compliance features as well as seamless integration with Microsoft products. Such things are not easy to develop.
In addition, RIM has a portfolio of more than 2,000 patents. In today’s highly litigious world — especially in the mobile market — this is certainly an attractive asset.
So can Icahn be the catalyst to realize these advantages? Maybe there will be a short-term bump. But keep in mind that RIM’s Co-CEOs, Jim Balsillie and Mike Lazaridis, control nearly 11% of the outstanding shares. In other words, they will have lots of leverage in repelling an attack. At the same time, the Canadian government has shown its willingness to block hostile bids on companies that are considered strategic.
True, Icahn has had some wins. The most recent was Google’s purchase of Motorola Mobility (NYSE:MMI), a company in which Icahn had a stake. Yet there have been some high-profile failures as well, including Clorox (NYSE:CLX) and Lions Gate Entertainment (NYSE:LGF).
Even if Icahn is successful in provoking some kind of benefit for shareholders, it could easily take six months or longer. Corporate activism usually requires lots of patience.
But in light of the competitive environment, there is likely to be continued deterioration in RIM’s business. It’s probably best to stay away from the stock for now.