Jump to content

Fairfax Doubles Stake in RIMM


JEast
 Share

Recommended Posts

Companies need to roll out devices to their entire sales and service teams, packing them with purpose-built business applications, not just generic email, browsers, and off-the-shelf productivity apps. With cellular connections, so salespeople are always connected, and the app also needs to works offline.

 

RIMM will cater to this business market. While Apple will have their devices cater to walled fluff content that consumers enjoy. RIMM will be about business - Apple walled fun.

 

Prem Watsa is going to have fun building RIMM devices that mean business.This all fits into the end to end global network of connecting things.

Link to comment
Share on other sites

Companies need to roll out devices to their entire sales and service teams, packing them with purpose-built business applications, not just generic email, browsers, and off-the-shelf productivity apps. With cellular connections, so salespeople are always connected, and the app also needs to works offline.

 

RIMM will cater to this business market. While Apple will have their devices cater to walled fluff content that consumers enjoy. RIMM will be about business - Apple walled fun.

 

Prem Watsa is going to have fun building RIMM devices that mean business.This all fits into the end to end global network of connecting things.

 

Seems to be the party line, RIMM builds for business and iPhone/Android is for 14yr old kids playing Angry Birds.  I was at a company meeting last night, 100 employees, I saw 0 Blackberrys, everyone had an iPhone or Android with one Palm Pre (that person making fun of themself in a presentation).  Three years ago 75% of this crowd had Blackberries, those same people all ditched them for the fun phones.  I've asked a few of these people and everyone of them said ditching the Blackberry was worth it and they wished they did it earlier.

 

When you lose a customer like that it's hard to go back.  I can't imagine any of these people jumping from the fun phone back to a Blackberry, the mindshare has been lost.

 

None of this stuff is fluff business either, people doing spreadsheets, one guy did a presentation off his iPhone.

 

One more anecdote, our company is moving into the mobile space in a large way due to customer demand.  What do customers want? They only want iOS and Android applications, they've communicated clearly that Blackberry/Palm/Windows isn't worth the effort.

 

This is all anecdotal but from my vantage point it's significant.  I don't hold any RIMM shares nor do I want to, I'm not sure how you regain all those lost customers.  Will be fascinating to watch.

Link to comment
Share on other sites

Companies need to roll out devices to their entire sales and service teams, packing them with purpose-built business applications, not just generic email, browsers, and off-the-shelf productivity apps. With cellular connections, so salespeople are always connected, and the app also needs to works offline.

 

RIMM will cater to this business market. While Apple will have their devices cater to walled fluff content that consumers enjoy. RIMM will be about business - Apple walled fun.

 

Prem Watsa is going to have fun building RIMM devices that mean business.This all fits into the end to end global network of connecting things.

 

Seems to be the party line, RIMM builds for business and iPhone/Android is for 14yr old kids playing Angry Birds.  I was at a company meeting last night, 100 employees, I saw 0 Blackberrys, everyone had an iPhone or Android with one Palm Pre (that person making fun of themself in a presentation).  Three years ago 75% of this crowd had Blackberries, those same people all ditched them for the fun phones.  I've asked a few of these people and everyone of them said ditching the Blackberry was worth it and they wished they did it earlier.

 

When you lose a customer like that it's hard to go back.  I can't imagine any of these people jumping from the fun phone back to a Blackberry, the mindshare has been lost.

 

None of this stuff is fluff business either, people doing spreadsheets, one guy did a presentation off his iPhone.

 

One more anecdote, our company is moving into the mobile space in a large way due to customer demand.  What do customers want? They only want iOS and Android applications, they've communicated clearly that Blackberry/Palm/Windows isn't worth the effort.

 

This is all anecdotal but from my vantage point it's significant.  I don't hold any RIMM shares nor do I want to, I'm not sure how you regain all those lost customers.  Will be fascinating to watch.

 

You're right! I started ignoring this talk of companies and their mighty IT departments only want Blackberry a while back. I credit it to people wanting to force reality to fit their book.

 

I was at a lunch yesterday with people spanning over a 3-4 industries: myself and some colleagues of mine, our Ernst & Young auditors and a few others; and we all had the same story about how in each of our workplaces Iphones and Android phones were now being supported and everybody had moved from Blackberry. I was the only person at the table with a Blackberry by the way.

 

My own anecdote, I asked one of our IT guys how many requests they had received for Blackberry phones since they started supporting Iphones and Android for company provided phones about 2 years ago, his answer: none! And he wasn't kidding!

 

 

 

Link to comment
Share on other sites

requests they had received for Blackberry phones since they started supporting Iphones and Android

 

FWIW, the bestbuy salesman I talked to discouraged me from buying blackberry ( not that I wanted to buy one ) - he was guiding me to android.

Link to comment
Share on other sites

Every time I hear of prem investing more $ in RIMM makes me want to sell my Fairfax shares. I know Prem has a good long term record, but I find myself disagreeing with nearly every stock investment he makes over the last fee years. Not sure if he's just trying to support a Canadian company, or if blackberry is still doing well in Canada and he doesn't realize that nobody is buying RIMM's crappg produce or what. He seems to have more faith in RIMM management than they have in themselves.

Link to comment
Share on other sites

I'm fine with the RIMM position in FFH, it represents a small % of total investments.  In a way, I need FFH to take these kind of positions because I couldn't/wouldn't.  Same thing goes with the muni's, CDS, deflation bet, etc.  I don't think you can have one without the other. 

Link to comment
Share on other sites

I really want to ask Mr. Watsa during next conference call why he wanted to bet on RIMM.

 

To me, this is a very tough market. There is no other companies better than RIMM? I think this is a gamble.

 

Dont waste time on it.

I have never, ever seen Prem answer this question about any company they have invested in.  He always has a stock answer ready.  Hwic has average returns on money invested in common stock of 20% over 25 years.  There is only a handful of investors on this baord who have managed that in any time period.  Leave them to it.  Not a single person on this board knows what Rimm has cooking and Prem isn't as naive as you all seem to think. 

Link to comment
Share on other sites

Every time I hear of prem investing more $ in RIMM makes me want to sell my Fairfax shares. I know Prem has a good long term record, but I find myself disagreeing with nearly every stock investment he makes over the last fee years. Not sure if he's just trying to support a Canadian company, or if blackberry is still doing well in Canada and he doesn't realize that nobody is buying RIMM's crappg produce or what. He seems to have more faith in RIMM management than they have in themselves.

 

Don't get carried away.  He's going to make investment bets on various things and like any manager, some will work out and some won't.  He's making the best calculated investments he can.  Half a billion in RIMM, which sounds like a massive amount to you and me, is less than a 2% position for a business that has $30B in assets.  Even if you only go by investable assets of $23B, it accounts for less than a 2.5% position.  So everyone keep your pants on!  :o  Cheers!

Link to comment
Share on other sites

Every time I hear of prem investing more $ in RIMM makes me want to sell my Fairfax shares. I know Prem has a good long term record, but I find myself disagreeing with nearly every stock investment he makes over the last fee years. Not sure if he's just trying to support a Canadian company, or if blackberry is still doing well in Canada and he doesn't realize that nobody is buying RIMM's crappg produce or what. He seems to have more faith in RIMM management than they have in themselves.

 

Don't get carried away.  He's going to make investment bets on various things and like any manager, some will work out and some won't.  He's making the best calculated investments he can.  Half a billion in RIMM, which sounds like a massive amount to you and me, is less than a 2% position for a business that has $30B in assets.  Even if you only go by investable assets of $23B, it accounts for less than a 2.5% position.  So everyone keep your pants on!  :o  Cheers!

 

Not to mention that Prem is now a board member (at RIMM not Sanjeev's board).  That equals an even stronger...'we don't comment on portfolio investments'.  Hope to see Balsillie at the Corner of BRK/FFH meeting...:-)

 

It would seem Uccmal is forever linked to RIMM.

Link to comment
Share on other sites

I think Prem Watsa has "cracked it", just like Steve Jobs said that he cracked it. Only Mr. Watsa will use the "crackberry" from RIMM, while Apple will use Apple TV.

 

It seems Microsoft likes what is taught at Waterloo University (Prem Watsa is chancellor), so much so that Microsoft hires more grads from Waterloo than any other North American university.

 

Is it possible that something is brewing that will bring these two together on a device? Also, IBM has a cross license patient sharing agreement with a company that Fairfax has in its portfolio. So, let's toss in Berkshire Hathaway as well, to make it a threesome.

Link to comment
Share on other sites

Every time I hear of prem investing more $ in RIMM makes me want to sell my Fairfax shares. I know Prem has a good long term record, but I find myself disagreeing with nearly every stock investment he makes over the last fee years. Not sure if he's just trying to support a Canadian company, or if blackberry is still doing well in Canada and he doesn't realize that nobody is buying RIMM's crappg produce or what. He seems to have more faith in RIMM management than they have in themselves.

 

Interesting.  The more I see HWIC invest, the more I am tempted to buy FFH shares even though I'm pretty sure I can do better than simply holding FFH, and the more I even think I would like to work with folks like HWIC someday.

 

Don't you guys like the fact that HWIC is trying to expand their circle of competence into technology, given that WEB and Munger have explicitly said that if they were younger, that's a sector they would like to better understand?

 

I think HWIC is starting to come into their own as a distressed investor, though they have had some missteps in the past.  They appear to be quite enamored with Wilbur Ross, who is someone I would certainly try to emulate.

Link to comment
Share on other sites

Wilbur Ross is an excellent role model.

 

This link is an interview with Wilbur Ross by Charlie Rose

 

http://www.charlierose.com/view/interview/11150

 

RIMM needs to halt production of consumer oriented handsets and only make enterprise-oriented ones, also eliminate the BIS service as to take strain off the aging BES infrastructure which has shown severe issues with scalability and reliability in the last two years.

 

The PlayBook also needs to be pulled from the consumer market and actions taken to secure enterprise partners that can develop real business applications for it and the forthcoming BlackBerry 10 QNX-based handset OS.

 

 

Every time I hear of prem investing more $ in RIMM makes me want to sell my Fairfax shares. I know Prem has a good long term record, but I find myself disagreeing with nearly every stock investment he makes over the last fee years. Not sure if he's just trying to support a Canadian company, or if blackberry is still doing well in Canada and he doesn't realize that nobody is buying RIMM's crappg produce or what. He seems to have more faith in RIMM management than they have in themselves.

 

Interesting.  The more I see HWIC invest, the more I am tempted to buy FFH shares even though I'm pretty sure I can do better than simply holding FFH, and the more I even think I would like to work with folks like HWIC someday.

 

Don't you guys like the fact that HWIC is trying to expand their circle of competence into technology, given that WEB and Munger have explicitly said that if they were younger, that's a sector they would like to better understand?

 

I think HWIC is starting to come into their own as a distressed investor, though they have had some missteps in the past.  They appear to be quite enamored with Wilbur Ross, who is someone I would certainly try to emulate.

Link to comment
Share on other sites

I have been reading and thinking RIMM for the whole weekend. The answer to myself is I have to treat FFH's entire investment in RIMM as a loss.  So 450M loss will be around $22/share. I think I can take it.

 

I also wonder whether FFH would get a better relationship with Canadian government by saving a Canadian icon and thousands of jobs.

 

 

Link to comment
Share on other sites

Txlaw: Re the Circle of Competence.

 

To safely (relative) invest in Cdn Industry; the competence circle really needs to include the mechanics of the banking, tech, oil/gas, & forestry industries - & you need to get trained by the masters. With RIM, 3 of the 4 sectors are covered - but they've also had some instruction in Oil/Gas from AIM, & their old holding of Russell Steel (pipeline supply). Long-term they really need to know the green industries as well - but they have some time yet.

 

SD

 

 

 

 

 

Link to comment
Share on other sites

Absolutely right zgrendi. I also think that thought is true in general; people are overestimating the importance of the current equity positions for FFH and underestimating the true future force of growth that lies in insurance. Just my opinion... I love having FFH in my portfolio as I see it as a great addition. They invest in things that I wouldn't touch with a ten-foot pole.

Link to comment
Share on other sites

I have been reading and thinking RIMM for the whole weekend. The answer to myself is I have to treat FFH's entire investment in RIMM as a loss.  So 450M loss will be around $22/share. I think I can take it.

 

I also wonder whether FFH would get a better relationship with Canadian government by saving a Canadian icon and thousands of jobs.

 

This doesn't really make sense.  You really think RIM is worth $0?

 

Someone the other day said that they wouldn't buy RIM even at $5.  I'll tell you this -- if were RIM were trading at $5 tomorrow, I'd be buying hand over fist.

Link to comment
Share on other sites

I have been reading and thinking RIMM for the whole weekend. The answer to myself is I have to treat FFH's entire investment in RIMM as a loss.  So 450M loss will be around $22/share. I think I can take it.

 

I also wonder whether FFH would get a better relationship with Canadian government by saving a Canadian icon and thousands of jobs.

 

This doesn't really make sense.  You really think RIM is worth $0?

 

Someone the other day said that they wouldn't buy RIM even at $5.  I'll tell you this -- if were RIM were trading at $5 tomorrow, I'd be buying hand over fist.

 

 

Is RIMM with zero?  No, that's probably not the case right now.  However, you can make a strong case for a permanent loss of capital if you believe that their phones suck, that clients have zero loyalty, that switching costs are not large, and that RIMM will continue to use shareholders' capital to pursue a market which they will inevitably lose.  The history of technology is littered with companies that were leaders in a particular product/service and that eventually squandered shareholders' equity.

 

So which view of RIMM is correct?  Will RIMM  be another Corel which was a zero for shareholders, or will it be another Apple which came back from the dead?  Time will tell.  As a user of both BB and Android, I have a fairly well entrenched (but perhaps not well informed!) view of RIMM's future.  But who knows, Apple came back from death's door...

 

And, we shouldn't forget that RIMM doesn't need to be a zero for this to work out badly for shareholders...

 

 

SJ

Link to comment
Share on other sites

I have been reading and thinking RIMM for the whole weekend. The answer to myself is I have to treat FFH's entire investment in RIMM as a loss.  So 450M loss will be around $22/share. I think I can take it.

 

I also wonder whether FFH would get a better relationship with Canadian government by saving a Canadian icon and thousands of jobs.

 

This doesn't really make sense.  You really think RIM is worth $0?

 

Someone the other day said that they wouldn't buy RIM even at $5.  I'll tell you this -- if were RIM were trading at $5 tomorrow, I'd be buying hand over fist.

 

 

Is RIMM with zero?  No, that's probably not the case right now.  However, you can make a strong case for a permanent loss of capital if you believe that their phones suck, that clients have zero loyalty, that switching costs are not large, and that RIMM will continue to use shareholders' capital to pursue a market which they will inevitably lose.  The history of technology is littered with companies that were leaders in a particular product/service and that eventually squandered shareholders' equity.

 

So which view of RIMM is correct?  Will RIMM  be another Corel which was a zero for shareholders, or will it be another Apple which came back from the dead?  Time will tell.  As a user of both BB and Android, I have a fairly well entrenched (but perhaps not well informed!) view of RIMM's future.  But who knows, Apple came back from death's door...

 

And, we shouldn't forget that RIMM doesn't need to be a zero for this to work out badly for shareholders...

 

 

SJ

 

Reasonable people can be on both sides of the debate on whether or not RIMM will work out badly for shareholders at prices currently paid. 

 

But a permanent loss of capital?  With Prem Watsa on the board?  You really think FFH will watch assets be dissipated and liabilities be increased such that there is nothing left whatsoever even upon liquidation of the company? 

 

That seems incredibly silly to me.

 

And I would be the first person to argue that Apple, Google, and maybe even MSFT are eating RIM's lunch.  I've personally seen people switch over to the iPhone from a BB who will probably never go back to RIM.  And for good reason too.  It's not because the iPhone is cool -- it's because iPhone is a superior device, and the Apple ecosystem (iOS and OSX) is very forward thinking.

Link to comment
Share on other sites

But a permanent loss of capital?  With Prem Watsa on the board?  You really think FFH will watch assets be dissipated and liabilities be increased such that there is nothing left whatsoever even upon liquidation of the company? 

 

That seems incredibly silly to me.

 

 

Silly like Canwest Global?  Or silly like Abitibi Bowater?  Or silly like Torstar? 

 

Or did you mean silly like TIG?  Or maybe Lindsey Morden?

 

 

The point of listing all of those train wrecks on which FFH was a passenger is that some value investments do not work out.  Sometimes they do not work out even if you have full control of the company.  Being an outside director of a company does not mean that Prem will prevent the inevitable (if it truly is inevitable, which is an open question).  But it does impose something of a moral constraint on FFH which may prevent a "cut-and-run" strategy. 

 

So, no, the potential for a permanent loss of capital is [glow=red,2,300]not silly[/glow], IMO.

 

 

SJ

Link to comment
Share on other sites

But a permanent loss of capital?  With Prem Watsa on the board?  You really think FFH will watch assets be dissipated and liabilities be increased such that there is nothing left whatsoever even upon liquidation of the company? 

 

That seems incredibly silly to me.

 

 

Silly like Canwest Global?  Or silly like Abitibi Bowater?  Or silly like Torstar? 

 

Or did you mean silly like TIG?  Or maybe Lindsey Morden?

 

 

The point of listing all of those train wrecks on which FFH was a passenger is that some value investments do not work out.  Sometimes they do not work out even if you have full control of the company.  Being an outside director of a company does not mean that Prem will prevent the inevitable (if it truly is inevitable, which is an open question).  But it does impose something of a moral constraint on FFH which may prevent a "cut-and-run" strategy. 

 

So, no, the potential for a permanent loss of capital is [glow=red,2,300]not silly[/glow], IMO.

 

 

SJ

 

All those investments you mention were leveraged companies where it was far from clear whether the assets were greater than the liabilities, and whether the equity would retain any value whatsoever after restructuring. 

 

There is a world of difference with RIM, and I don't understand why anyone would lump RIM into that category of investments.  You are essentially saying that the liquidation value of RIM, which I believe is greater than $0 if you run the numbers conservatively and don't believe there is fraud involved, will decrease over time, even with Watsa on the board. 

 

I completely disagree. 

 

But perhaps I misspoke by talking about "permanent loss of capital."  I agree that if RIMM is only worth $5 and you paid $20 for your share, you have suffered a permanent loss of capital.  My main point was that to treat RIM as a complete loss is either extremely conservative or disingenuously stated in order to freak people out regarding the potential impact on FFH's NAV.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...