Watsa no stranger to betting on perceived value

[Parsad]

The CEO's comments strike me as someone who is trying to bring confidence back into the business.  With the change in the CEO position and board, I would not be surprised if the board is working on garnering attention for a takeover.  There has been plenty of talk regarding a takeover, but nothing materialized.  Perhaps, these changes are there to make the market aware that the company is sincere about change and alternatives.  Cheers!

[ubuy2wron]

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!

I read somewhere that MSFT hires more Waterloo grads than any other N.A. university. As far as Prem sitting on RIMMs board since it is one or FFH's largest investments a board position can not be construed as taking him away from FFH's interest ,more good than bad can flow to FFH and its shareholders because of this IMO.

[Fairfaxnut]

Judging by the negative comments made about RIM even on a value invest board like this, may suggest a further look into RIM's operations.  I was pretty excited to see Prem join the board.

[Parsad]

As far as Prem sitting on RIMMs board since it is one or FFH's largest investments a board position can not be construed as taking him away from FFH's interest ,more good than bad can flow to FFH and its shareholders because of this IMO.

 

Yeah Ubuy2won, that's what I don't understand.  RIMM is a Fairfax position.  He's joining the board of an investee company.  It's not like he's giving them free advice while neglecting Fairfax. 

 

Fairfax's insurance business now runs somewhat independent of Prem, because Andy Barnard oversees all of them.  So, Prem can spend more time on the Hamblin-Watsa side working with the team there, on their existing investments and future acquisitions.  Would people here rather Prem spend his time twittling his thumbs, or work on finding new acquisitions, investments and maximizing the value of existing positions?  Naturally the latter.  Cheers!

[Uccmal]

I dont see an issue at all with Watsa and how he chooses to spend his time.  I would suggest he already has a good handle on Rim's business from a historical perspective.  Now, he gets to participate from a go forward perspective.  Since he is a director we will now have complete access to FFH insider filings which we didn't get before - we only got the US trades - I have always maintained that HWIC was buying Rim in Canada as well. 

 

On a go forward basis we should be able to gauge Rim's prospects from the insider buys now.  FFH and Watsa are no slouches on the tech front - they have people who do this as a specialty and will hire outside help as needed. 

 

Watsa and his team own shares in companies worldwide and he travels a fair bit so he undoubtably can get a pretty good view of BB worldwide usage and enthusiasm. 

 

On the negative side, there are past investments that have blown to pieces rather rapidly such as Canwest Global, and others that have degenerated slowly such as fbk or torstar.  So, take his involvement with a grain of salt, and focus on more of what he does over time. 

 

I am unsure how to gauge Lazaridis's proposed buy.  He is very bright but may be prone to sentimentality, or 50 million may just be interest and dividends from other businesses. 

 

On the fence - waiting - no position any longer. 

[Ben Graham]

My fellow value investors,

 

It is a great privilege to be privy to the information shared on this message board.

 

It appears to me that Prem Watsa, with his newly appointed dual role as chancellor of Waterloo and sitting on RIMM's board, has a desire to get involved with the innovation that Level 3 was built for.

 

We need to keep it all in the family, like Microsoft hires more Waterloo grads than any other North American university.

 

There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it.

 

Fairfax (short for "fair, friendly acquisitions") as the name implies will always have the thought in mind to facilitate a merger - consolidate an industry.

 

The family players that I'm aware of are: Pieces to the puzzle

 

Microsoft

 

Berkshire Hathaway (Todd & Ted with DirecTV) Warren with IBM

 

Prem Watsa (RIMM & LVLT)

 

It is time for RIMM & Waterloo to apply all the innovation it has ready for Level (3) to deliver content to all the screens around the globe.

 

Like this: (source brkerguy)  How Verizon Prepares for the First 4G LTE Super Bowl in Indianapolis (Video) http://www.gottabemobile.com/2012/01/19/verizon-first-4g-lte-super-bowl-46/

 

The Super Bowl delivered by LVLT.

[oddballstocks]

There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it.

 

So that means that in eight years every man woman and child on the planet will have 6.6 devices that require streaming for that stat to hold true.  I'm calling BS on that.  Let's revise this and consider that in eight years it's unlikely that the entire world population will be out of poverty and will be able to afford 6 $100+ devices with their associated data contracts. 

 

So let's say that 50% of the world will be able to afford them, so that means 12 devices per person.  This stat shows how meaningless linear projections are. Twelve devices...give me a break, I'd need a murse to carry all that crap...

[racemize]

It may be somewhat excessive, but between my wife and I, we have 12 devices.

[Guest Hester]

Maybe it seems farfetched that every man woman and child on Earth will have a streaming device in 8 years, especially considering that world hunger is still a problem, and many cannot afford normal blackberries, much less RIMM blackberries (to be fair, most of the people on the earth starving are LVLT shareholders).

 

However, have you ever considered that there are over eight million known living species on Earth? Only 1 species uses LVLT's services. Just one. Huge, trillion gazillion dollar potential market, not to mention the possibility of increased demand if extra-terrestrial aliens visit Earth for LVLT's services.

[Ben Graham]

Ericsson CEO Predicts 50 Billion Internet Connected Devices by 2020

 

Already, the carriers are salivating at the prospect of providing cellular connections to these products and have set up divisions dedicated to machine-to-machine connectivity

 

http://gigaom.com/2010/04/14/ericsson-sees-the-internet-of-things-by-2020/

 

 

Cisco: 50 Billion Things on the Internet by 2020 [infographic]

 

http://www.readwriteweb.com/archives/cisco_50_billion_things_on_the_internet_by_2020.php

[Kraven]

Maybe it seems farfetched that every man woman and child on Earth will have a streaming device in 8 years, especially considering that world hunger is still a problem, and many cannot afford normal blackberries, much less RIMM blackberries (to be fair, most of the people on the earth starving are LVLT shareholders).

 

However, have you ever considered that there are over eight million known living species on Earth? Only 1 species uses LVLT's services. Just one. Huge, trillion gazillion dollar potential market, not to mention the possibility of increased demand if extra-terrestrial aliens visit Earth for LVLT's services.

 

Hester, you make some very good points.  When are people going to realize that the animal kingdom needs streaming devices as well?  Where is my dog's streaming device, I ask you?  I think that if we can get even 10% of the dogs in the US and Canada (not to mention a small percentage of cats) with some kind of internet connected device, even if it's just a blackberry, this could be huge.  I think even LVLT could make a shekel or 2 at that point. 

[Santayana]

There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it.

 

So that means that in eight years every man woman and child on the planet will have 6.6 devices that require streaming for that stat to hold true.  I'm calling BS on that.  Let's revise this and consider that in eight years it's unlikely that the entire world population will be out of poverty and will be able to afford 6 $100+ devices with their associated data contracts. 

 

So let's say that 50% of the world will be able to afford them, so that means 12 devices per person.  This stat shows how meaningless linear projections are. Twelve devices...give me a break, I'd need a murse to carry all that crap...

 

Of course every one of these devices would have to be for personal use.  There's no way that companies would be providing them to their employees for work reasons.  And I can't even fit my television or PC in my murse/european carry all/ok it's just a purse.

[Parsad]

There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it.

 

So that means that in eight years every man woman and child on the planet will have 6.6 devices that require streaming for that stat to hold true.  I'm calling BS on that.  Let's revise this and consider that in eight years it's unlikely that the entire world population will be out of poverty and will be able to afford 6 $100+ devices with their associated data contracts. 

 

So let's say that 50% of the world will be able to afford them, so that means 12 devices per person.  This stat shows how meaningless linear projections are. Twelve devices...give me a break, I'd need a murse to carry all that crap...

 

That was pretty awesome!  I especially liked the "murse" touch...very funny.  Cheers!

[Parsad]

Maybe it seems farfetched that every man woman and child on Earth will have a streaming device in 8 years, especially considering that world hunger is still a problem, and many cannot afford normal blackberries, much less RIMM blackberries (to be fair, most of the people on the earth starving are LVLT shareholders).

 

However, have you ever considered that there are over eight million known living species on Earth? Only 1 species uses LVLT's services. Just one. Huge, trillion gazillion dollar potential market, not to mention the possibility of increased demand if extra-terrestrial aliens visit Earth for LVLT's services.

 

I thought Oddball was funny...this was pretty good too!  At first I thought the number was high, and it probably is because it's extrapolated out, but after thinking about it, I realized I had four devices myself...two laptops, smartphone and tablet!  So while 50B is more than just a stretch, 20B may be realistic.  Cheers!

[Ben Graham]

Is this turning into a yahoo board? Attacking Prem Watsa with dog comments. That is not very nice.

[Ben Graham]

There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it.

 

So that means that in eight years every man woman and child on the planet will have 6.6 devices that require streaming for that stat to hold true.  I'm calling BS on that.  Let's revise this and consider that in eight years it's unlikely that the entire world population will be out of poverty and will be able to afford 6 $100+ devices with their associated data contracts. 

 

So let's say that 50% of the world will be able to afford them, so that means 12 devices per person.  This stat shows how meaningless linear projections are. Twelve devices...give me a break, I'd need a murse to carry all that crap...

 

That was pretty awesome!  I especially liked the "murse" touch...very funny.  Cheers!

 

By 2020, there will be 50 billion 'things' connected to the Internet - everything from your body, car, alarm clock and even cows.

 

You forgot to add the COWS!

 

http://www.readwriteweb.com/archives/cisco_50_billion_things_on_the_internet_by_2020.php

[Zorrofan]

 

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."

 

 

That wins quote of the day!

 

cheers

Zorro

[BargainValueHunter]

http://business.financialpost.com/2012/01/24/watsa-needed-several-assurances-on-rim/

 

As a decline in the stock price accelerated over the past year – the shares have lost some 90% of their value since a peak in 2008 – Mr. Watsa has been a buyer. Fairfax is now listed as RIM’s fourth-largest investor, with 2.25% of the shares, and Mr. Watsa said his firm “will look to add to our position.”

 

Sunday’s appointment of new CEO Thorsten Heins won Mr. Watsa’s backing after the pair met for a private dinner.

 

“I think he’s going to do an outstanding job at RIM…. I would not make the mistake of underestimating Thorsten,” Mr. Watsa said, comparing the “quiet” and “disciplined” Mr. Heins to Tim Cook, Apple Inc.’s replacement for the charismatic Steve Jobs.

 

He said he is at a loss to explain why RIM is trading below book value, even though it is experiencing revenue growth, and has significant free cash flow ($700-million in the last quarter) and no debt.

 

“The underlying values are not down 90%,” Mr. Watsa said, adding that he is equally stumped by financial analysts who were recommending the stock at more $100 but now suggest selling it below $20.

 

Even if RIM were to command a smaller share of the smartphone market, it remains a growth market, Mr. Watsa explained.

 

“I just expect RIM to get its share,” he said. “I’m going to do everything I can as a new board member to help them.”

 

"Analysts" or Prem Watsa...

 

Whom should I listen to?...

 

::)

[Fairfaxnut]

Our family is at 10 devices.....increased after the Blackberry playbook sales.  The whole family got one.

[Guest longinvestor]

There will be over 50 billion devices with screens that need to deliver content on them by the year 2020. RIMM will get a market share, if Prem Watsa has anything to do with it.

 

So that means that in eight years every man woman and child on the planet will have 6.6 devices that require streaming for that stat to hold true.  I'm calling BS on that.  Let's revise this and consider that in eight years it's unlikely that the entire world population will be out of poverty and will be able to afford 6 $100+ devices with their associated data contracts. 

 

So let's say that 50% of the world will be able to afford them, so that means 12 devices per person.  This stat shows how meaningless linear projections are. Twelve devices...give me a break, I'd need a murse to carry all that crap...

 

Of course every one of these devices would have to be for personal use.  There's no way that companies would be providing them to their employees for work reasons.  And I can't even fit my television or PC in my murse/european carry all/ok it's just a purse.

 

Folks are surely confusing "coolness" of iPhones and Androids with the game RIMM is playing & winning. I just looked at the latest quarterly results, RIM shipped ever more BB devices.  "Corporate messaging/email anywhere/anytime" is the sport. The less cool the devices the better. Blackberries and Dell Laptops are peas in a pod to the corporate world. The buying decision is completely out of the hands of you and I ("coolness" customers) and in the hands of the IT/Finance leaders in the corporate world. They like functional, cheap, highly secure and instantly serviceable solutions. No, they don't want music or Youtube capability:-) Dell and RIMM own this space. The moat is that the more the devices already in use in an organization, the more difficult it is to switch. Prem is absolutely correct, even if RIM loses marketshare in the future, they have quite a bit of sticky revenues. 

 

 

[biaggio]

Longinvestor-any idea what that part (the sticky) of the business is worth?

 

Don t know much re RIMM, have been following story here + in news (own it indirectly like others here thru FFH)

 

Wonder about any hidden values? Specifically their network business:

 

Article in NYtimes  http://dealbook.nytimes.com/2012/01/23/new-rim-chief-not-looking-to-split-company/

 

" the company’s incoming chief executive says he is not entertaining the idea of splitting the company into two separate businesses.

 

Thorsten Heins, who was named chief executive of RIM on Monday, said on a conference call that he thought RIM had a “very strong technology heritage,” and that he did not plan to separate RIM’s device business, which includes the BlackBerry and the PlayBook tablet, from its network business."

 

[SharperDingaan]

Keep in mind that we're value investors looking at a busted mo-mo darling, & one of our biggest weaknesses is buying too early. It is highly likely that declining market share & marketing miss-steps - driving headline news, is going to trump the value metrics for at least the next 6 months or so.

 

Hard to believe that we not see at least one additional manic 1/3 sell off by late summer. There's no rush.

 

SD

 

 

 

 

 

 

[VAL9000]

 

Folks are surely confusing "coolness" of iPhones and Androids with the game RIMM is playing & winning. I just looked at the latest quarterly results, RIM shipped ever more BB devices.  "Corporate messaging/email anywhere/anytime" is the sport. The less cool the devices the better. Blackberries and Dell Laptops are peas in a pod to the corporate world. The buying decision is completely out of the hands of you and I ("coolness" customers) and in the hands of the IT/Finance leaders in the corporate world. They like functional, cheap, highly secure and instantly serviceable solutions. No, they don't want music or Youtube capability:-) Dell and RIMM own this space. The moat is that the more the devices already in use in an organization, the more difficult it is to switch. Prem is absolutely correct, even if RIM loses marketshare in the future, they have quite a bit of sticky revenues.

 

If only RIM understood this, too.  A significant chunk of their marketing and product development is targeted squarely at the consumer (think Playbook gaming, BBM billboard ads).  If RIM started to act in a manner consistent with the "business first" thesis, I would consider acquiring shares at this level.  I'm with SharperDingaan for now - sitting this out, but keeping an eye on either a change in position or another move down in price.

 

For what it's worth, being saturated at a customer site doesn't qualify as a moat with mobile devices.  This isn't Windows, where all of your software runs on a single platform.  The vast majority of businesses supply their people with smart-phones solely for voice and email capabilities.  Those two applications are nearly frictionless in terms of switching.  This will change if businesses begin using mobile hardware as a platform, but today it's just not relevant.  It may never be the case if the cloud application model becomes the default standard.

 

The comparison to Dell isn't a fair one, either.  In this context, Dell is a low cost producer of computer hardware.  RIM is not.  Smart phones haven't yet become a commodity business, so price isn't the key decision factor for most buyers.  Hence why we rarely see Android in the corporate world, despite their lower pricing.

 

I am going to offer that we're well on the way to a commoditized smart phone market.  As has been mentioned elsewhere, the innovation gap that Apple originally opened has largely been closed by competitors.  Assuming there are no game-changing innovations in the next few years (think touch-interface circa 2007), the race in the future will be won by software marketshare first and phone hardware pricing second.  The problem for RIM is that they are a hardware maker (terrible margins) supplying exclusively to a third- or fourth-place software platform (terrible scale).  So when commoditization kicks in, they are going to be squeezed from both sides, and that's not a good place to be.

 

I still think that the best way forward for RIM is that they should either become a hardware company, a software company, or split themselves in two.  I would also support a niche business model where they service only the business world, with product development geared towards security, reliability, device fleet management, and other business-oriented concerns.  Right now, they appear to be fighting too many battles on too many fronts, and I think it's pretty clear that they are losing most of them.

 

[Parsad]

I still think that the best way forward for RIM is that they should either become a hardware company, a software company, or split themselves in two.  I would also support a niche business model where they service only the business world, with product development geared towards security, reliability, device fleet management, and other business-oriented concerns.  Right now, they appear to be fighting too many battles on too many fronts, and I think it's pretty clear that they are losing most of them.

 

I think you're dead on here and they need to focus solely on business, security, etc.  Unfortunately, there are facets of their business they are going to have to add to, so they can compete with others...such as cloud computing is becoming an integral part of data management for businesses.  The easier they can make the set-up and transition for IT departments, the more likely that will be the system people want to use.  Apple is making inroads into business users because they are slowly offering the broadest array of services, and the useability factor is extremely high.  Most of their competition is going to have to focus on niche areas to survive.  Cheers!

[txlaw]

Keep in mind that we're value investors looking at a busted mo-mo darling, & one of our biggest weaknesses is buying too early. It is highly likely that declining market share & marketing miss-steps - driving headline news, is going to trump the value metrics for at least the next 6 months or so.

 

Hard to believe that we not see at least one additional manic 1/3 sell off by late summer. There's no rush.

 

SD

 

The problem with this notion is that it is very difficult to predict how the market will react to either good or bad news in a situation like this, unless you have "trader's sense."  Therefore, it's best to rely on the concept of MOS and prepare to average down if there is a manic sell off.  In other words, don't buy a full position unless it's going to be a small one.

 

Edit: I suppose you can buy a full position if you really believe it's very undervalued, for example, if you think RIMM sells well below liquidation/runoff/break up value, but I'm not there yet.