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Watsa no stranger to betting on perceived value


CanadianMunger
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I know that this comment I'm going to make is going to create a mess of this thread, but could it be that Prem and his team see some sort of synergy between RIMM and LVLT?  What services or products/services could RIMM sell that would directly benefit them and LVLT?  If you control the highway and you control the trucks (perhaps a better analogy would be shipping containers), that is a pretty big monopoly in distribution!  Would love to hear ideas and comments.  Cheers!

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I think he's just protecting their interest in the company.  Also, because Prem is chancellor for the University of Waterloo, if there is anything he can do to help the company, he would probably want to.  The high-tech industry in Waterloo pretty much exists because of RIMM, and they have such a huge impact on the area and university.  Cheers! 

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Throwing good money after bad.

 

First FFH made a significant investment in a tech company that is out of touch with consumers, and had its market share being eaten away by competitors (BTW, this will get worse IMO as MS puts out increasingly credible products and as people become increasingly comfortable with Android).  Now Prem is going to burn a whole bunch of his time on the RIMM board instead of doing what he should be doing, which is running an insurance group.  And trust me, RIMM will be a sewer for time over the next few years as they try to stave off something that strikes me a inevitable.

 

One of the few things that gives FFH any value is Prem and his investment prowess (they sure as hell can't underwrite).  And now it looks like we have less of him.

 

Nice.

 

SJ

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One of the few things that gives FFH any value is Prem and his investment prowess (they sure as hell can't underwrite).  And now it looks like we have less of him.

 

 

It's a good point.  If Prem is true to his word then they will max out at around $250m in terms of this position.  However what price should FFH put on his time? 

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Hi Sanjeev,

 

I doubt that there is any link between their RIMM investment and LVLT. Ma Bell and others are still in between the two, so there is no synergy that I can think of. However, the trend of higher use for the two companies is still firmly in place. Data transportation is going up exponentially and with more apps, social networking and other new found uses, smartphones are used more and more.

 

Regarding RIMM, I have a really hard time understanding the attraction. The competitive landscape for that business is getting worse by the day. Even Apple seems slow getting their first 4G phone out while Samsung and others are miles ahead. Maybe that RIMM will be able to carve out a niche within the business market, but that is a big maybe.

 

Cardboard

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Hi Sanjeev,

 

Regarding RIMM, I have a really hard time understanding the attraction. The competitive landscape for that business is getting worse by the day. Even Apple seems slow getting their first 4G phone out while Samsung and others are miles ahead. Maybe that RIMM will be able to carve out a niche within the business market, but that is a big maybe.

 

Cardboard

 

Can anyone give me an idea of the perception of the quality of the University of Waterloo education in Canada? Is the Waterloo area a mini-Canadian tech hub (ex-RIMM)? Perhaps FFH's interest is linked more to this phenomenon. If RIMM can attract the brightest Canadian tech developers, then over time it will find a way to compete globally.

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Hi Sanjeev,

 

Regarding RIMM, I have a really hard time understanding the attraction. The competitive landscape for that business is getting worse by the day. Even Apple seems slow getting their first 4G phone out while Samsung and others are miles ahead. Maybe that RIMM will be able to carve out a niche within the business market, but that is a big maybe.

 

Cardboard

 

Can anyone give me an idea of the perception of the quality of the University of Waterloo education in Canada? Is the Waterloo area a mini-Canadian tech hub (ex-RIMM)? Perhaps FFH's interest is linked more to this phenomenon. If RIMM can attract the brightest Canadian tech developers, then over time it will find a way to compete globally.

 

I believe Waterloo has a top notch engineering program.

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Guest longinvestor

I know that this comment I'm going to make is going to create a mess of this thread, but could it be that Prem and his team see some sort of synergy between RIMM and LVLT?  What services or products/services could RIMM sell that would directly benefit them and LVLT?  If you control the highway and you control the trucks (perhaps a better analogy would be shipping containers), that is a pretty big monopoly in distribution!  Would love to hear ideas and comments.  Cheers!

 

Sanjeev, this is a very interesting thought. Sure, Blackberries, the devices have lost ground to iPhones, Androids but it is the "network stupid" that RIMM is all about and what the corporate world pays for. So RIMM is already "selling" network globally. How about partnering with the lowest cost, most scalable and the most global network? Ma Bells in the way? Lol, they can't even keep their US networks working. The joke is that smart phones can do lots of cool stuff, all except make calls which always connect and don't drop!

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I'm really baffled as to why Watsa would get on the board, because according to the new CEO the company is doing amazing.

 

 

http://www.cnbc.com/id/46094976

This is not a turnaround company...

 

I truly believe — and the board is with me on this assessment — that we are very, very strongly positioned as an integrated, vertical player," Heins said. "There is no plan on my side or the board's side to sell any of these important, constituting elements of our future success.

 

https://www.youtube.com/watch?v=QUFwhpcrCTw

We are a great, innovative but sometimes we innovate too much while we are building a product.

 

So this is a strongly positioned company not in need of any turnaround, which just needs some execution, like slowing down their crazy unbelievable innovation, because they have way too much of that. So I guess the plan is to add a pager attachement to the Playbook?

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So this is a strongly positioned company not in need of any turnaround, which just needs some execution, like slowing down their crazy unbelievable innovation, because they have way too much of that. So I guess the plan is to add a pager attachement to the Playbook?

 

 

 

Hahaha... I couldn't help but laugh out loud when I read that too. Stupid us, it all makes sense now, RIM's problem is that they innovate too fast for their own good and need to take a breather every now and then.

 

The attachment to RIM makes me shake my head and any mention of RIM and LVT together makes me cringe.

 

I am not one to hand out advice especially not to Prem but this Buffett quote seems appropriate: "If I thought they needed my help in running the company I wouldn't have invested."

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Hi Sanjeev,

 

Regarding RIMM, I have a really hard time understanding the attraction. The competitive landscape for that business is getting worse by the day. Even Apple seems slow getting their first 4G phone out while Samsung and others are miles ahead. Maybe that RIMM will be able to carve out a niche within the business market, but that is a big maybe.

 

Cardboard

 

Can anyone give me an idea of the perception of the quality of the University of Waterloo education in Canada? Is the Waterloo area a mini-Canadian tech hub (ex-RIMM)? Perhaps FFH's interest is linked more to this phenomenon. If RIMM can attract the brightest Canadian tech developers, then over time it will find a way to compete globally.

 

I am not from Canada but I think it is one of the top 3 university if not the best in Canada. My impression is based on my undergraduate batchmate's feedback who went there for their MS degree in Engineering. That was 10-11 years back so don't know if things have changed.

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I think you guys are way over-reacting on how much of Prem's time this is going to consume.  I'd attach about the equivalent of him spending 2-3 hours a month on this.  Do you guys know his schedule?  He is usually in the office from Tuesday to Thursday, and his schedule is non-stop during that time...he barely has a moment to take a leak.  He usually leaves a little early Fridays to go to his cottage on the weekends.  He probably has more work to do as chancellor of Waterloo than on the board of RIMM.

 

As for the University of Waterloo.  It has arguably the best engineering department in all of Canada, and would rank pretty highly in North America.  Waterloo itself is the city that RIMM and Nortel built...a mini-San Jose or Silicon Valley.  Tons of startups are there.  If RIMM goes under, it will have an impact on Waterloo economically and intellectually.  Cheers! 

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I think you guys are way over-reacting on how much of Prem's time this is going to consume.  I'd attach about the equivalent of him spending 2-3 hours a month on this.  Do you guys know his schedule?  He is usually in the office from Tuesday to Thursday, and his schedule is non-stop during that time...he barely has a moment to take a leak.  He usually leaves a little early Fridays to go to his cottage on the weekends.  He probably has more work to do as chancellor of Waterloo than on the board of RIMM.

 

As for the University of Waterloo.  It has arguably the best engineering department in all of Canada, and would rank pretty highly in North America.  Waterloo itself is the city that RIMM and Nortel built...a mini-San Jose or Silicon Valley.  Tons of startups are there.  If RIMM goes under, it will have an impact on Waterloo economically and intellectually.  Cheers!

 

 

Sorry Sanj, but I don't buy it.  Being a credible, legitimate board member for a major company is a big job, requiring significant amounts of reading and several meetings per year (look in a 10K to see meeting attendance).  It's probably even more of a challenge for a tech company, particularly in the first few years of board membership when directors are working at getting up to speed.  If a board member additionally takes on a larger role on the audit committee, or compensation committee, it can take even more time.

 

I have no doubt that we're currently getting 60 hours per week out of Prem.  No complaints there.  However, it is not in my interests for him to instead spend 4 hours per week on RIMM and only 56 on FFH.  As FFH gets larger with more international subs and more non-insurance subs, the leadership requirement is increasing.  It's a bad thing for us when Prem dedicates his time to other endeavours.  I can accept that he would dedicate his time to charitable or social initiatives (church, universities, etc), but if his mind is to be dedicated to a profit oriented business, it should be to FFH's business.

 

 

SJ

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I think you guys are way over-reacting on how much of Prem's time this is going to consume.  I'd attach about the equivalent of him spending 2-3 hours a month on this.  Do you guys know his schedule?  He is usually in the office from Tuesday to Thursday, and his schedule is non-stop during that time...he barely has a moment to take a leak.  He usually leaves a little early Fridays to go to his cottage on the weekends.  He probably has more work to do as chancellor of Waterloo than on the board of RIMM.

 

As for the University of Waterloo.  It has arguably the best engineering department in all of Canada, and would rank pretty highly in North America.  Waterloo itself is the city that RIMM and Nortel built...a mini-San Jose or Silicon Valley.  Tons of startups are there.  If RIMM goes under, it will have an impact on Waterloo economically and intellectually.  Cheers!

 

Thanks Parsad, and other for responses to this. Great to get the Canadian perspective on this.

 

I think it's a brilliant position for FFH to be in. Sitting on the board of a school known to draw students with great ability to innovate, and potentially getting to invest alongside them. Seems like a win/win. They get a smart Chancellor, Watsa gets to do well by doing good.

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RIM was some kind of a darling few years ago. Some even called it the next Microsoft of some kind.

 

The fact is that I didn't know how to confidently say that it's competitive advantage was durable, so I've passed.

 

Now we are few years later, and it's still in the "Too hard" pile to me. I would get anxious if the FFH position in it would get too high.

 

I don't especialy like these 7 feet high turnaround situations, but Prem and co. did a good job with that overall since 1985.

 

Cheers!

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