The Yacktman Fund repeated its pattern from last quarter and bought a single new stock. Last quarter they bought Intel (INTC, Financial) and this quarter they went for underdog Research In Motion Ltd. (RIMM, Financial). The transaction consisted of 2,958,575 shares at $43.59 per share.
Research In Motion is a wireless technology company based in Ontario, best known for its smartphone Backberry device, which it launched in 1999. Hugely popular for a time, it now has Apple (AAPL, Financial) and Google (GOOG, Financial) squeezing out its market share. Seeing mainly the lack of new innovation and looming threat of more cutting-edge rivals, many investors have abandoned the stock, sending its price down 58.5% since the beginning of this year. The company also recently announced it will cut 2,000 jobs, or 10% of its workforce, which did not help its image.
As I wrote in a previous article, one thing to watch is RIMMâs margins. Its gross margin declined each year from 55.2% in 2005 to 44.3% in 2011, and its operating margin fell from 32.5% in 2005 to 25.5% in 2011. This is a trend often present in companies on their way to bankruptcy, although they would have to fall into negative territory for that to be an immediate concern.
Below the surface though, RIMM has undeniable signs of life. Its cashflow statement shows it earned record $2.97 billion in free cash flow last year, and $2.03 billion the year prior. It currently has about $2.3 billion in cash on its balance sheet, with about $4.5 billion in long-term liabilities and debt.
Further, the company has branched out and made some bold, cash-generating moves recently. It cornered the government market, receiving the first FIPS 140-2 certification for its BlackBerry tablet, making it the first tablet certified for deployment within U.S. federal government agencies. It also placed a winning bid for Nortelâs patent portfolio for $770 million. New changes within company structure include a new COO, expanded and rearranged roles within management, and mass consolidation of operations for greater efficiency and speed getting new products to market.
RIMMâs second-quarter financial results were mostly weaker than the same quarter last year, which management attributes to delays in new product introductions, meaning new, presumably revenue-increasing products are on the horizon.
Yacktman noted in his recently released second-quarter letter that he believes in âOld Tech.â He added more Cisco (CSCO, Financial) when it fell 10% in the quarter, and 4,326,758 shares of Microsoft (MSFT, Financial). The valuations, he said, were too compelling to ignore when weak prices were due in large part to âthe general disfavor of âold techâ shares.â
Research In Motion Ltd. has a market cap of $12.99 billion; its shares were traded at around $24.79 with a P/E ratio of 3.9 and P/S ratio of 0.7. Research In Motion had an annual average earnings growth of 53.4% over the past five years.
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Research In Motion is a wireless technology company based in Ontario, best known for its smartphone Backberry device, which it launched in 1999. Hugely popular for a time, it now has Apple (AAPL, Financial) and Google (GOOG, Financial) squeezing out its market share. Seeing mainly the lack of new innovation and looming threat of more cutting-edge rivals, many investors have abandoned the stock, sending its price down 58.5% since the beginning of this year. The company also recently announced it will cut 2,000 jobs, or 10% of its workforce, which did not help its image.
As I wrote in a previous article, one thing to watch is RIMMâs margins. Its gross margin declined each year from 55.2% in 2005 to 44.3% in 2011, and its operating margin fell from 32.5% in 2005 to 25.5% in 2011. This is a trend often present in companies on their way to bankruptcy, although they would have to fall into negative territory for that to be an immediate concern.
Below the surface though, RIMM has undeniable signs of life. Its cashflow statement shows it earned record $2.97 billion in free cash flow last year, and $2.03 billion the year prior. It currently has about $2.3 billion in cash on its balance sheet, with about $4.5 billion in long-term liabilities and debt.
Further, the company has branched out and made some bold, cash-generating moves recently. It cornered the government market, receiving the first FIPS 140-2 certification for its BlackBerry tablet, making it the first tablet certified for deployment within U.S. federal government agencies. It also placed a winning bid for Nortelâs patent portfolio for $770 million. New changes within company structure include a new COO, expanded and rearranged roles within management, and mass consolidation of operations for greater efficiency and speed getting new products to market.
RIMMâs second-quarter financial results were mostly weaker than the same quarter last year, which management attributes to delays in new product introductions, meaning new, presumably revenue-increasing products are on the horizon.
Yacktman noted in his recently released second-quarter letter that he believes in âOld Tech.â He added more Cisco (CSCO, Financial) when it fell 10% in the quarter, and 4,326,758 shares of Microsoft (MSFT, Financial). The valuations, he said, were too compelling to ignore when weak prices were due in large part to âthe general disfavor of âold techâ shares.â
Research In Motion Ltd. has a market cap of $12.99 billion; its shares were traded at around $24.79 with a P/E ratio of 3.9 and P/S ratio of 0.7. Research In Motion had an annual average earnings growth of 53.4% over the past five years.
Also check out:
