Research In Motion Ltd.’s stock fell below its book value for the first time in nine years, a signal investors consider the BlackBerry maker to be worth less than the value of its property, patents and other assets.
RIM fell 3.6 percent to $18.61 at 11:35 a.m. in New York, below the book value per share of $18.92 at the end of last quarter, according to data compiled by Bloomberg data. Book value comprises a company’s assets including cash, inventories, real estate and intellectual property minus its liabilities.
“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 to single digits within 12 months.
The 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 phones built by Apple Inc., Samsung Electronics Co. and HTC Corp., according to research firm Canalys. The decline has put pressure on RIM to shake up its management and prompted investors such as Jaguar Financial Corp. to call on RIM to divide into separate companies, seek a merger or sell itself.
If a private-equity investor were interested in buying Waterloo, Ontario-based RIM, book value would be a useful indicator to gauge what the company would be worth if the buyer then sold the assets, said Matt Thornton, an Avian Securities LLC analyst in Boston.
“It really comes into play for somebody looking for downside protection,” said Thornton, who rates RIM “neutral.” “If we liquidate or sell off the assets, what’s our downside protection, that’s when it becomes a more meaningful metric.”
The stock had dropped 67 percent this year before today, cutting RIM’s market value to $10.1 billion. RIM had a book value of $9.92 billion on Aug. 27, the end of its last quarter.
RIM last traded below book value in 2002, before it became profitable. 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 MSCI World Information Technology Index trades at 3.2 times book value, with 18 of 147 of its stocks, including 13 Japanese companies, below 1. RIM’s rival Apple costs 4.8 times book value.
Shares of Nokia Oyj, which has also been losing smartphone market share, traded briefly below book value in August and now trades at about 1.4. Nokia shelved its Symbian operating system in February and struck a deal with Microsoft Corp. to build phones on its Windows Mobile platform to try to regain market share from Apple and Google.
Analysts estimate RIM’s book value will increase 7.7 percent to $20.38 a share in the quarter ending this month, according to the average of seven forecasts in a Bloomberg survey.
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