Major Shareholder Bolsters RIM Stake

[dcollon]

Major Shareholder Bolsters RIM Stake

By WILL CONNORS

 

One of Research In Motion Ltd.'s biggest shareholders has nearly doubled his stake in the struggling BlackBerry maker, providing a modest boost of confidence as the company works to claw back its rapidly dwindling share of the U.S. smartphone market.

 

Research In Motion disclosed Monday that Prem Watsa, through his Canadian investment firm Fairfax Financial Holdings Ltd., now owns just under 10% of the company's shares after buying stock earlier this month, according to a regulatory filing.

 

The purchase makes Mr. Watsa the largest shareholder by far, surpassing RIM's founder and former co-chief executive, Mike Lazaridis, who has long owned a little more than 5% of the company.

 

Mr. Watsa, a well-known value investor in Canada, already holds a seat on RIM's board, having first acquired a sizable stake in the company ahead of joining the board earlier this year. He started buying RIM shares last September, acquiring 2.2% late last year and bumping that up to 5.1% early this year.

 

Mr. Watsa now holds twice what RIM's next-closest shareholders—Primecap Management Co. and Mr. Lazaridis—each hold. Former co-CEO Jim Balsillie also held a big stake in the company, but since he stepped down from the board earlier this year, he is no longer required to report his holdings.

 

In January, Mr. Watsa joined RIM's board during a major corporate overhaul. The company's longtime co-chief executives stepped down and a little-known insider, Thorsten Heins, was named CEO.

 

Mr. Watsa is often referred to as the "Warren Buffett of Canada," and many investors were heartened by Mr. Watsa's appointment to the board, hoping he would help RIM to regain some of its stock value.

 

But since then, RIM's stock has continued to fall, sinking more than 50% on a run of profit warnings, product delays and underwhelming public presentations. The company said last month it would delay the release of its newest BlackBerry until after the holiday season and disclosed plans to cut 5,000 jobs by the end of the fiscal year.

 

Mr. Watsa's new stake didn't encourage shareholders immediately. RIM's shares were trading Monday in New York as much as 2% lower but ended the session 1.3% higher at $6.86. Its market capitalization is about $3.5 billion, off from more than $80 billion five years ago.

 

Mr. Watsa doesn't have a history of shareholder activism and is known to place long-term bets on otherwise unheralded stocks. One of his most prominent moves came near the end of the most recent decade when he bet against rising U.S. housing prices and eventually earned more than $2 billion in gains by buying and selling credit-default swaps between 2003 and 2007.

 

He has long maintained that he is confident in RIM's long-term prospects and said the company is undervalued. RIM has a cash cushion of more than $2 billion and no debt, along with 78 million existing BlackBerry subscribers.

 

RIM's share of the U.S. smartphone market has fallen from about 50% to less than 10%, according to several tech-industry surveys.

 

But the company's shares have fallen more than 90% since their peak in 2008, and many investors and analysts have said they have little faith that RIM's new CEO, Mr. Heins, can turn the company around without outside help. Mr. Heins has said he is considering all strategic options and hasn't ruled out a sale of the company.

 

A spokesman for RIM said the company "does not usually comment on the shareholdings of individual investors."

 

Mr. Watsa is one of two new directors at RIM. At its recently concluded annual shareholder meeting this month, RIM voted Timothy Dattels, a former Goldman Sachs Group Inc. partner, to the board.

 

At the meeting, Chairwoman Barbara Stymiest said RIM is looking to make additional board changes in the coming year.

[roundball100]

"Warren Buffett of Canada" ... not exactly following the same road map, but perhaps there are many paths to the same destination. 

[twacowfca]

"Warren Buffett of Canada" ... not exactly following the same road map, but perhaps there are many paths to the same destination.

 

Prem has never drawn that comparison.  His focus has been more on deep discount to balance sheet value a' la Ben Graham rather than better business a' la WEB.  :)

[bargainman]

Prem has never drawn that comparison.  His focus has been more on deep discount to balance sheet value a' la Ben Graham rather than better business a' la WEB.  :)

 

Well Prem is at a far earlier stage.  When BRK was a much younger company, and Buffett had less mula to play with, he was definitely a Graham, cigar butts kind of investor...