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Calling it Quits

Article By: corykarr
Personal finance


An analysis of Blackberry and a comparison to a company in the movie "Other People's Money."


Submitted:Jul 25, 2012    Reads: 6    Comments: 0    Likes: 0   


In the film "Other People's Money," Danny DeVito makes a great argument about the decision that the company should liquidate. Since the point of a company is to provide profit to their shareholders, it is obvious that Danny DeVito has the best option for both the shareholders and the company. The reason for this is that given the tone of both of the candidate's speeches, the company is not doing very well right now. The cable company is more likely than not giving low payouts of dividends, along with little or no growth, and no foreseeable innovations to change this. Danny DeVito mentions that the stock is also one-sixth the price it was ten years ago. This means the stock has been shrinking over the years, and is more likely than not going to keep shrinking. The other huge factor in the decision is what the future holds. As they said in the movie, cable wiring is a dying business, since fiber optic cables are being developed, which are better and faster. This means that once fiber optics cables are readily available, the stock will not be worth anywhere near twenty-five dollars, and probably won't be close to even ten dollars. The cable company will be worth next to nothing since their type of cables is a dying technology. Their assets are still worth a decent amount today since standard cable wiring is still being made at this point in time. However if they wait, their assets will be useless by the time fiber optics are out, so therefore they are definitely worth more dead than alive.

This dilemma directly relates today's stock market and the many companies that are publically traded. Blackberry (RIMM) is one of those companies and is in a very similar situation to the company in this movie. Over the last couple of years, Blackberry's stock had been steadily declining. They also have been around a long time, and have some faithful clients and stockholders, but that does not mean the company is in great shape. Over the past couple of weeks Blackberry's stock has still been going down, and it has almost no hope in sight. In January of 2013, Blackberry is going to come out with their new phone and operating system, Blackberry 10. However this is less of a hope for success and more of a gasp for air. Over the last couple years with the development of Apple's IPhone and Google's Android, Blackberry has been struggling to keep up. Their last couple of software releases did not have anything innovative, and recently they have not even been able to keep up with the other companies' developments. Each other popular company has something that the others cannot offer. Apple has a sleek, hipster image, with a fan base of people who will wait in lines for days just to get their newest product. Android has a versatile and customizable operating system that any manufacturer of phones can use. Even the abysmal windows phone is not in last since it has great compatibility with most people's computers. Blackberry really has no one except for an older crowd that used their phones when they were actually useful, and were just too lazy to learn something new. Blackberry will be lucky if they come anywhere close to the level that their competitors are on.

Even if Blackberry 10 is able to match the current generation of smartphones, it will be as if Blackberry found a raft in the middle of the ocean. It will only keep them alive longer, but it will have almost no chance of actually saving them. Blackberry is favorable in that they do have no debt, which is very similar to the cable company. However Blackberry is not currently bringing in any large amount of revenue considering they do not sale almost any phones now. Blackberry is going to continue to eat up their cash on hand, until they cannot afford to pay their employees. If Blackberry were to accept the fact like Danny DeVito did in the movie, shareholders could get between twelve to fourteen dollars a share. However, Blackberry rather tries to hang on and let their current stock price of fewer than seven dollars continue to steadily drop. Shareholders could double their money if they just accepted the fact that the company is dead, moved on, and invested it somewhere else. This is why blackberry's situation is similar to the cable company and that they are worth more dead than alive.





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