Disappearing Brands

Research in Motion, Limited

An Interesting Type of Maximum Point on Profit-Revenues Graph
Today, July 5, 2012, we add Research in Motion (RIM), Limited to that growing list of companies that reveal a maximum point on their profits-revenues graph. The others are Ford, Verizon Communications, Yahoo, Kroger, Southwest Airlines, Air Tran (which merged with Southwest in March 2011) and General Motors (which was forced to file bankruptcy in June 2009). The maximum point we witness with RIM is unusual, arising from a Type II to Type III transition on the cumulative quarterly profits-revenues data. All the other maxima were observed in the annual profits-revenues graphs.

************************************** RIM reports huge Q1 miss; first operating loss in 8 years, BB10 launch delayed
http://news.yahoo.com/rim-reports-huge-q1-miss-first-operating-loss202035506.html;_ylt=A2KJ3CZ9_fRPEUIAJLOTmYlQ;_ylu=X3oDMTBmMHF ub2M1BHNlYwNzYwRjb2xvA2FjNA--

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Research In Motion (NASDAQ: RIMM) may be the best example of an innovative company that lost its edge. As a result, it will disappear in 2013. Five years ago, RIM was the only smartphone company of any size, and it had almost the entire corporate market. But it made a fatal mistake in failing to adapt its technology for consumer use. In June 2007, Apple (NASDAQ: AAPL) launched the iPhone, and the rest is history. By Zach Epstein | BGR News Thu, Jun 28, 2012

RIM posts huge Q1 miss: First net

Read more: 24/7 Wall St. Ten Brands That Will Disappear In 2013 - 24/7 Wall St. http://247wallst.com/2012/06/21/247-wall-st-10brands-that-will-disappear-in-2013/#ixzz1zk18sSzI

Analysts anticipated another miss ahead of Research In Motions first-quarter earnings report on Thursday as sales continue to stall ahead of the struggling smartphone vendors first BlackBerry 10 smartphone launch, which is expected this October. RIM warned in late May that it would likely see an operating loss in the first fiscal quarter its first net quarterly loss since fiscal 2004 but the Streets consensus ranged from a profit of $0.01 per share on $3.1 billion in sales to a net loss of $0.03 per share. The numbers are now in and RIM reported on Thursday that it lost $0.37 per share on revenue of $2.8 billion. Developing

Research in Motion Ltd.

NASDAQ: RIMM http://finance.yahoo.com/q;_ylt=A2KLOzJg_fRPCA8AqKmTmYlQ?s=rimm

Research In Motion Limited (RIMM) -NasdaqGS

7.35 0.14(1.87%) Jul 3, 1:00PM EDT

Headlines Add RIMM Headlines to My Yahoo!

Overview Profile News Charts Financials Historical Quotes Analyst Estimates Options SEC Filings Picks Hulbert Insiders Income Statement Balance Sheet Cash Flow Statement

Quarterly Financials for Research in Motion Ltd.

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Dear All: Since most of you are familiar with what I have been doing, I will get straight to the point and make this more like an email, not an article. (A quick review of what makes a company Type I, Type II, or Type III and the characteristics of each type is provided at the end, in case this caught your attention, for the first time.) I just read an interesting article on Disappearing Brands in America, see http://247wallst.com/2012/06/21/247wall-st-10-brands-that-will-disappear-in2013/4/ It obviously caught my attention and I wanted to see the list of 10 most likely brands that will disappear according financial experts. One of them (no. 6 on this list) is RIM, for Research In Motion (stock symbol RIMM) about which I had some knowledge because of Blackberry and my general lack of expertise in modern communication gizmos like smartphones etc. I am old fashioned email guy and just getting into Instant Messaging and Text Messaging (occasionally).

Table 1: Annual Profits-Revenues data for RIM, Limited

Year Revenues, x $, billions 6.009 11.065 14.953 19.907 18.435 Profits, y $, billions 1.294 1.893 2.457 3.411 1.164 Profit Margin Comments 100(y/x) 21.67 Type II 17.11 Slope h = 0.152 16.43 Intercept c = 0.379 17.13 For 2008 to 6.31 2010

1-Mar-08 28-Feb-09 26-Feb-10 25-Feb-11 2-Mar-12 Sources: http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker= RIMM:US and http://www.fool.com/quote/NASDAQ/research-in-motion-limitedusa/RIMM/financial-statements

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I looked at their financials and was able to get the data from FY ending March 2008 to FY ending March 2012. That is five data points on annual basis. I was also able to get quarterly data (the five most recent quarters) without too much effort. Tables 1 and 2 summarize the data for your convenience and review. I would like to look at more annual data going back to at least ten years but did NOT find it so far in spite of some quickie searches. Nonetheless, the limited amount of data here tells a good story. Why is Wall Street labeling RIM as a disappearing brand? Is there anything alarming about the financial data? Let us look at the annual data first. This shows profits increasing with increasing revenues, if we neglect the most recent year which showed a significant drop in both revenues and profits. May be there are market forces at work that Wall Streeters understand better. (It appears that the lack of demand for their products caused the BIG drop in revenues and also profits for the FY just ended.) Let us start with the pre-decline data. Profits are increasing with increasing revenues. If we join the (x, y) pairs for 2008 and 2011 (for a quick analysis), we get y = 0.152x + 0.379. Thus, the data reveals both a positive slope (h > 0) and a positive intercept (c > 0) in the linear law y = hx + c. This is Type II behavior. Most companies seem to reveal Type I behavior when they first become profitable (see Appendix 1). Profits usually increase rapidly with increasing revenues when a company first exceeds its breakeven revenue x = x0. Profit margins also increase rapidly. In the Type II stage, which often follows (as we see with RIM, if earlier data are analyzed, it is very likely that Type I behavior will be revealed), in addition to lower slope, the profit margins decreases with increasing revenues. This can be understood from y/x = h + c/x = 0.152 + 2.217/x increasing with increasing revenues (and vice versa if revenues decrease), see also Table 1. This in itself is NOT a cause for concern. Companies recover from Type II and return to a healthy Type I behavior where both profits and profit margins increase with increasing revenues. Microsoft and Google are two good examples of this Type I to Type II and back to Type I that I have encountered. But RIM shows an unusual Type II to Type I transition in the most recent annual data. A simultaneous decrease in BOTH revenues and profits is USUALLY NOT a cause for alarm. That would fall under Type I behavior , which
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means both profits and profit margins increase with increasing revenues, or vice versa. With RIM, however, we see something more interesting. The Type I slope, between 2011 and 2012, is very very steep. In the most recent period of profits decline, the change in revenues x = - 1.472 and change in profits y = -2.247 and the slope h = y/x = (-2.247)/(-1.472) = 1.53. The slope h is positive because both these changes are negative. More interestingly, the numerical value h > 1. Revenues dropped by $1.47 billion but profits dropped by $2.25 billion. In other words, profits are dropping faster than revenues are dropping.

Annual Profits, y [$, billions] Five year period FY2008 to FY2012

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 0 5 10 15 20 25

2011
Type II behavior (h > 0, c > 0) y = 0.152x + 0.379

2008

INVERSE Type I behavior (h > 1 > 0, c < 0) y = 1.53x 26.98

2012

Annual Revenues, x [$, billions] Five year period FY2008 to FY2012

Figure 1: The five year annual data for FY 2008 to FY 2012 (fiscal year ends in March). The arrows attached with each line segment show the direction of the movement. A Type II behavior is observed between 2008 and 2010 and one deduce the linear law y = hx + c = h(x x0) = 0.152x + 0.379. This equation was obtained by joining the lowest and highest profits-revenues pair (one could get more sophisticated with linear regression but that is not necessary at this stage). The
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real problem is the drop in both revenues and profits in the last year. This shows an unusual Type I behavior. It is Type I since both revenues and profits decreased. What is unusual is the numerical value of the slope h = 1.53 > 1. Perhaps, herein lies the reason for the alarm bells being sounded by Wall Street for this company. This is first such instance of an unhealthy and negatively impacting change to Type I that I have observed in my financial analysis to date.

Table 2: Quarterly Profits-Revenues data for RIM, Limited

Quarter Ending Revenues, Profits, Cumulative Cumulative x y Revenues, x Profits, y Comments $, billions $, billions $, billions $, billions 4.82 0.67304 4.82 0.67304 31-May-11 4.11 0.31985 8.93 0.99289 31-Aug-11 5.26 0.26924 14.19 1.26213 30-Nov-11 4.2 -0.12642 18.39 1.13571 29-Feb-12 2.81 -0.51764 21.2 0.61807 31-May-12 Source: Data for the five most recent quarters http://www.marketwatch.com/investing/stock/RIMM/financials/income/quarter In all the data that I have encountered so far, it is Type III behavior (negative slope) that is usually the cause for alarm. Perhaps, RIM can recover from this alarming INVERSE Type I behavior as well. (It is INVERSE Type I since profits and revenues are both decreasing instead of increasing.) Perhaps, it should be allowed to sort its revenues situation and return to the Type II (and then to a healthy Type I with increasing profits and revenues) without all the Wall Street frenzy. Once revenues return, profits will return! Because of the transition is from Type II to Type I, it may be argued that the cost structure at RIM is still sound. It is the revenue streams that the management must focus on. Ten-year annual data would be better. It might reveal the healthy Type I behavior and the transition to Type II before the current one. But, such a longer term analysis will hardly change any minds since the Wall Street focus seems to be aleady on that last line segment. The numerical value of h > 1, in an INVERSE Type I trend, is certainly a cause for concern.
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Table 3: Profits-Revenues data for Google Inc. for 2008 and 2009
Year 2008 2009 Revenues, x 21.8 23.65 x = 1.85 Profits, y 4.23 6.52 y = 2.29 Comments The slope h = y/x = 2.29/1/85 = 1.24 since y >x

In this context it is worth recalling here the recent analysis of Google Inc. financial data posted at http://www.scribd.com/doc/98825141/Google-A-Lovable-OneTrick-Pony-Another-Single-Product-Company-Analyzed-Using-the-NewMethodology , see Table 1 and Figure 1). The two-year extract of this data for Google Inc. above reveal a normal Type I behavior with both profits and revenues increasing simultaneously. The increase in profits is greater than the increase in revenues, h > 1 but this situation is unsustainable and Google returned to and operated on the line with slope h = 0.351 which was established between 2007-2010. Indeed, a review of prior year data shows that RIM exhibited an exactly similar behavior (Type I with h > 1 followed by another Type I with h < 1) between 2003 and 2004 when it returned to profitability after three continuous years of losses (in 2002, 2002, and 2003), see Figures 4 and 6, to be discussed later. Thus, it is to be hoped that RIM will also be able to reverse this damaging INVERSE Type I trend (also with h > 1) in the coming year. Now let us turn our attention to the quarterly data in Table 2. That tells an interesting story as well. What is cause for alarm is profits decreasing with increasing revenues, which would make it Type III behavior (see Appendix 1). This is what usually leads to problems that I have noticed earlier and talked about (Ford, Verizon, Yahoo, Kroger, Southwest Airlines, Air Tran). However, we notice something interesting in the quarterly data. Usually, we consider cumulative revenues and cumulative profits during a single FY or single CY. In this case, data for five consecutive quarters were available readily and I just decided to look at cumulative for the five quarters. And BINGO! We see a maximum point on the profits-revenues graph looked at in this way, see Figure 2. This is the first observation of a maximum point with quarterly data that I have been able to make. The unhealthy consequences of observing such a maximum
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point on he (annual) profits-revenues graph has been emphasized in earlier articles (see bibliography list). Now we find the financial experts from Wall Street labeling a company with such a maximum point on its profits-revenues graph as a disappearing brand! Is this a coincidence? General Motors was forced ino bankruptcy (in June 2009) after operating past its maximum point for a few years. Air Tran was forced into a mergr (in March 2011) with Southwest Airlines after a similar transition from Type I to Type II to Type III and thus going through a maximum point and operating past the maximum.

Cumulative Quarterly Profits, y [$, billions] Five consecutive quarters starting 31May2011

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 0

Type II behavior y = 0.063x + 0.37 FY2008-FY2010

Type III behavior y = -0.184x + 4.523 FY2011 to FY2012

10

15

20

25

Cumulative Quarterly Revenues, x [$, billions] Five consecutive quarters starting 31May2011

Figure 2: Maximum point revealed on the cumulative profits and revenues graph for Research in Motion (RIM), Limited. The curve was generated by the computer. One can see the maximum point by simply studying the numbers in the cumulative profits column carefully. Also, we usually only take data for four quarters and do the cumulative for a year and then start over for the next year.
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Here, I have continued the cumulative calculations with the fifth quarter. Notice that there was a loss reported in the fourth quarter of the previous FY and a loss is also reported in the first quarter of the current FY. Also, revenues went down from quarter ending Nov 30, 2011 to the next quarter and the next. This drop in revenues is the real reason for the reported losses. When revenues disappear, profits will soon disappear, especially if the company is operating close to the breakeven or cut-off revenues. When we do the cumulatives, this gives the negative slope (Type III behavior) and hence the maximum point since the company flipped from Type II to Type III with the losses (or decreasing profits if we do cumulative). Hence, although the annual profits-revenues graph has NOT yet revealed a maximum point (or, equivalently, Type III behavior) the cumulative quarterlies does and Wall Street has already soured on this company. RIM should be given a chance to recover and this disappearing brand trashing should stop. One year of huge loss is not a cause for alarm or even two consecutive quarters of losses. But, I am only good at analyzing trends on x-y graphs. I do NOT know enough about their products (like the delayed Blackberry launch) and their revenue streams. However, it still seems too hasty to bury a still breathing kicking soul! Praying for a speedy recovery of RIM, Limited.

Very sincerely V. Laxmanan, Sc. D. July 5, 2012

For completeness the profits and revenues data for the period 1997-2012 has now been compiled in Table 4 and illustrated graphically in Figure 3 to 5.

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Table 4: Annual Profits-Revenues data for RIM, Limited (1997-2012) Revenues, x Profits, y $, millions $, millions 12.071 0.044 1997 33.159 0.54 1998 47.342 6.409 1999 84.967 10.498 2000 221.327 -6.21 2001 234.053 -28.32 2002 396.732 -148.86 2003 594.616 51.829 2004 First report of revenues in excess of one billion dollars in 2005 Year Revenues, x Profits, y $, billions $, billions 1.350 0.213 2005 2.066 0.382 2006 3.037 0.632 2007 6.009 1.294 2008 11.065 1.893 28-Feb-09 14.953 2.457 26-Feb-10 19.907 3.411 25-Feb-11 18.435 1.164 2-Mar-12 Revenues decreased by x = 1.472 between FY2011 and FY2012 Profits decreased even more, by y = 2.247, giving h = 1.526 Notice that RIM has reported losses for three years in a row, 2001, 2002, and 2003, before returning to profitability. Thus, several transitions are observed as the company grew and revenues increased (from millions to billions) between 1997 to 2008, from Type I to Type III and back again to Type I, as illustrated in Figures 3 to 5 that follow which consider different time periods. A transition from this normal Type I to Type II and then to more unhealthy INVERSE Type I was then finally observed as illustrated in Figure 5. These successful transitions also suggest that RIM might be able to negotiate tis way out of the apparently damaging course (to oblivion, as predicted by 24/7 Wall Street dot com) that it is on right now. This, of course, depends on offering innovative and cost-effective solutions to the demands of its customers.
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Year

Annual Profits, y [$, billions] Six year period FY1997 to FY2002

0.04 0.03 0.02 0.01 0

Type I behavior y = 0.192x 0.0058

2001
-0.01 -0.02

2002
-0.03 -0.04 0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

Annual Revenues, x [$, billions] Six year period FY1997 to FY2002

Figure 3: Revenues have increased thousand fold, from millions to billions, since 1997. RIM was actually founded in 1984 but data for the early years (1984-1996) were not readily available. A Type I behavior was observed before RIM started reporting losses in 2001. The straight line joining the (x, y) pairs for 1998 and 2000, y = 0.192x 0.0058 is taken as the representative of this behavior. The data for 1997 and 1999 fall actually on a roughly parallel line with a small intercept (or cut-off revenue, or breakeven revenue). Only two of the three years with losses (2001 and 2002) appear in this plot.

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Annual Profits, y [$, billions] Ten year period FY1997 to FY2006

0.60

0.40

Unsustainable Type I behavior y = 0.232x 0.0999

2006

0.20

Sustainable Type I behavior y = 0.232x 0.0999 2004 Type III behavior y = -0.741x + 0.145
0.50 1.00 1.50 2.00 2.50 3.00

0.00

-0.20

2003

-0.40 0.00

Annual Revenues, x [$, billions] Ten year period FY1997 to FY2006

Figure 4: The ten-year period from 1997-2006 is covered here. The scale of this graph is chosen to highlight the three consecutive years of losses (2001-2003), followed by the return to profitability (2004-2006). Type III behavior was observed during the years when profits decreased (or, equivalently losses increased) with increasing revenues, see red line with the negative slope, with y = -0.741x + 0.145. The return to profitability in 2004 occurs with an interesting Type I transition, illustrated by the upward sloping solid blue line. Revenues increased by x = 0.198 but profits increased by y = 0.201. Thus, profits were increasing faster than revenues and the slope h = y/x = 1.014 > 1. Obviously such a high rate of conversion of revenues into profits cannot be sustained indefinitely. (This like tapping into the reserve energy and muscle power of an Olympic runner!) Thus, we see a second transition to another Type I line, see dashed blue line, with the y = 0.232x 0.0999. This Type I line actually joins the (x, y) pairs for 2005 and 2008 (the latter point lies outside the scale of this graph, in the next graph).
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Extrapolation backwards yields good agreement with the data for 2003 to 2005 (three points with the highest profits and revenues) and even some earlier years.

Annual Profits, y [$, billions] Five year period FY1997 to FY2012

5.00

4.00

Type II behavior y = 0.152x + 0.379

3.00

2.00

1.00

0.00

Type I behavior y = 0.232x 0.0999

0 5 10 15

INVERSE Type I behavior y = 1.53x 26.98

20 25 30

-1.00

Annual Revenues, x [$, billions] Five year period FY1997 to FY2012

Figure 5: The profits-revenues data for RIM (1997-2012) illustrates, as expected, the transition from an early Type I behavior (1997-2008) to Type II behavior (2008-2011) and then the current INVERSE Type I behavior between FY2011 to FY2012. The evolution of these three lines has already been discussed in detail and so will not be repeated.

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120

Quarterly Profits, x [$, billions] Three year period FY2003-2005

100 80 60 40 20 0 -20 -40 -60 -80 0 50 100 150 200 250 300 350 400 450 500

Sustainable Type I behavior y = 0.367x 44.03 4Q2005 Unsustainable Type I behavior y = 1.78x 187.01

Quarterly Revenues, x [$, billions] Three year period FY2003-2005

Figure 6: The quarterly profits-revenues data for RIM for the FY 2003-2005 (12 consecutive quarters is plotted here specifically to gain some insights about how a company (such as RIM here) returns to profitability after a sustained three year period of losses (from 2001-2003). The data plotted here has also been compiled into a table. The horizontal line in red is the revenues-axis (x-axis). A loss was reported for all four quarters in 2003, 1Q04 and 4Q05. The steep red line connects the (x, y) pairs for 3Q03 and 4Q03 and has the equation y = 1.78x 187.01. Between these two quarters revenues increased by x = 13.326 and profits increased, or equivalently losses decreased, by y = 23.723 yielding an incredibly steep slope h = y/x = 1.78. This invariably seems to be the case when a company breaks even and starts producing a profit. (I have observed this in many other cases but this is the most dramatic illustration.) However, this high rate of
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conversion of revenues into profits is unsustainable for a long period of time and may be compared to be the reserve energy and muscle power that is harnessed by an Olympic gold medalist to win a race and cross the finish line. Exhaustion will soon set in and the runner will collapse if it continues. Notice that the 1Q04 (x, y) pair lies very close to this unsustainable (red) Type I line. After producing a small profit in 2Q04 (only $2.149 million), the company settles down to a more sustainable Type I line (blue) which is followed over several quarters. The only exception is 4Q2005 where an inexplicably high loss was reported. A linear regression could be used, but considering the nearly perfect fit, the straiught line joining two extreme points, 2Q04 and 3Q05, is used here, y = 0.3674x 44.03. The analysis presented here, about how breakeven revenues are achieved, almost seems to suggest that a company possesses some sort of genetic code or artificial intelligence built into it by its culture and organizational structure. This determines the sustainable Type I slope h, it ability to muster the unsustainable Type I slope h and the rate at which it is able to convert additional revenues (above breakeven, or the cut-off value) into profits. The analogy with Einsteins photoelectric law, K = E W = hf W is very telling in this context. Just as a photon of energy E = hf must give up some of its energy to produce an electron with the maximum kinetic energy K, a company must give up some of its revenues to produce the profit P. Thus, P = R C is exactly analogous to Einsteins photoelectric law. Einstein called the difference (E K ) = W as the work function, which is unique to each metal (which is being bombarded with photons to produce electrons). Like each company has its unique cost structure but the profits are always produced at the fixed h = y/x once the cut-off is exceeded. Thus, money in economics, finance, and business, behaves just like energy in physics.

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 Appendix 1: Three Types of Companies General Background and Introduction

It has not yet been generally appreciated that all businesses follow the same, very simple, mathematical law. It is actually a universal law, which can be shown to be a consequence of the classical breakeven analysis for the profitability of a company. In the real world, this manifests itself as a simple linear law y = hx + c where x is revenues and y is profits and h and c are constants that can be deduced from the financial data, as just discussed. The constant c can be related to the fixed costs and the constant h to the unit variable cost in the breakeven model. Depending on the numerical values of h and c (positive or negative), we can observe three types of profits-revenues graphs, which lead to what may be called Type I, Type II, and Type III behavior. Thus, ALL businesses can be evaluated in terms of three basic types of profits-revenue graphs. Examples of these three types of behavior have been provided in recent articles on this topic (all written since the Facebook IPO on May 18, 2012) that are available on the Internet, see link below. http://www.scribd.com/vjlaxmanan Consider a company making and selling N units of a product. Let a denote the fixed costs and b the unit variable costs. The total costs C is the sum of the fixed and the variable costs and is given by C = a + bN. If p is the unit price, the total revenues R generated by the sales is given by R = pN. This also means N = R/p, a relation we will use shortly. The Profits P can now be deduced using the universal statement that applies to all companies, big and small, viz., Profits = Revenues - Costs. Thus, we get, P = R - C = pN - bN - a = (p -b)N - a = [(p - b)/p] R - a = hR - a This implies a linear relation between profits P and revenues R, and follows when we eliminate N using N = R/p. It can be rewritten as y = hx + c where x is revenues and y is profits and h and c are constants whose values can be deduced from the (a, b, p) triplet for each product. More generally, the numerical values of h
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and c can be deduced from the financial statements (the 10-K and the 10-Q) filed with the SEC every quarter and also readily available at various internet sources, such as MSN Money, which provided the impetus for this article. All of the data for Annie's Inc. is compiled in the tables to facilitate further study and analysis.

Slope h = 1 - (b/p) Determined by the unit variable cost b and unit price p Intercept c = - a Determined by the fixed cost, a

The linear law y = hx + c, quite interestingly, also suggests three different possibilities, depending on the numerical values of the constants h and c. This gives rise to what may be called Type I, Type II, and Type III companies. Examples of all three behaviors may be found in the real world, and have been discussed in the articles just mentioned (see www.scribd.com/vjlaxmanan). The three types can be described, briefly, as follows: 1. Type I (h > 0, c < 0, positive slope, negative intercept which also means a positive intercept on the x-axis, or the revenues-axis). Both profits and profit margins increase with increasing revenues. This is usually the case for all companies in the very early stages of growth and emergence into profitability. (Today, on July 4-5, 2012, we have encountered an unusual Type I with RIM, Limited revealing h > 1 with both revenues and profits going down together.) 2. Type II (h > 0, c > 0, positive slope, positive intercept). Profits increase but profit margins decrease with increasing revenues. Also, profits increase at a lower rate than in the Type I stage. 3. Type III (h < 0, c > 0, negative slope, positive intercept, and yes, very rarely also with negative intercepts on both axes). Profits decrease with increasing revenues, or vice versa, i.e., profits can also increase with decreasing revenues. Correspondingly, profit margins can either go down with increasing revenues, or up with decreasing revenues. Also, as shown elsewhere, the profits-revenues data for a single company shows the transitions between Type I to Type II to Type III behavior, over a period of time. Microsoft is a good example of a company that has made the transition from
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Type I to Type II and then back again to Type I. This is discussed separately (see bibliography). Google is another example but there is a huge difference between what happened at Microsoft and what happened at Google. Apple illustrates a near PERFECT Type I behavior. Quite surprisingly, that totally confusing Type III behavior, described under no. 3 above, also appears to be quite common and is observed with several companies in the Fortune 500 list of 2012. The consequence of these three types of behavior, taken together, is the maximum point on the profits-revenues graph of a company. This too has been observed with several companies, but alas, is not widely known as of this writing in the business community. It has also, surprisingly, escaped the attention of economists and the academic scholars in the financial world. The most important and the largest of such companies is Ford Motor Company. Others are Verizon Communications, Yahoo, Kroger, Southwest Airlines and Air Tran (which was acquired by Southwest Airlines in 2011). General Motors also showed a Type III behavior, for an extended period, and was operating past its maximum point, before its historic bankruptcy filing in June 2009. That is a total of 6 out of 24 (give and take) companies that I have studied recently (since May 18, 2012, the date of the Facebook IPO.) Today, we must add RIM to that list of companies that reveal a maximum point on the profits-revenues graph. This is an unusual maximum point arising from a transition from Type II to Type III behavior on the cumulative quarterly profits-revenues data.

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 Appendix 2: Bibliography
Related Internet articles posted at this website Since the Facebook IPO on May 18, 2012
1. http://www.scribd.com/doc/95906902/Simple-Mathematical-Laws-GovernCorporate-Financial-Behavior-A-Brief-Compilation-of-Profits-RevenuesData Current article with all others above cited for completeness, Published June 4, 2012 with several revisions incorporating more examples. 2. http://www.scribd.com/doc/94647467/Three-Types-of-Companies-FromQuantum-Physics-to-Economics Basic discussion of three types of companies, Published May 24, 2012. Examples of Google, Facebook, ExxonMobil, Best Buy, Ford, Universal Insurance Holdings 3. http://www.scribd.com/doc/96228131/The-Perfect-Apple-How-it-can-bedestroyed Detailed discussion of Apple Inc. data. Published June 7, 2012. 4. http://www.scribd.com/doc/95140101/Ford-Motor-Company-Data-RevealsMount-Profit Ford Motor Company graph illustrating pronounced maximum point, Published May 29, 2012. 5. http://www.scribd.com/doc/95329905/Planck-s-Blackbody-Radiation-LawRederived-for-more-General-Case Generalization of Plancks law, Published May 30, 2012. 6. http://www.scribd.com/doc/94325593/The-Future-of-Facebook-I Facebook and Google data are compared here. Published May 21, 2012. 7. http://www.scribd.com/doc/94103265/The-FaceBook-Future Published May 19, 2012 (the day after IPO launch on Friday May 18, 2012). 8. http://www.scribd.com/doc/95728457/What-is-Entropy Discussion of the meaning of entropy (using example given by Boltzmann in 1877, later also used by Planck to develop quantum physics in 1900). The example here shows the concepts of entropy S and energy U (and the derivative T = dU/dS) can be extended beyond physics with energy = money, or any property of interest. Published June 3, 2012. 9. The Future of Southwest Airlines, Completed June 14, 2012 (to be published).
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10.The Air Tran Story: An Important Link to the Future of Southwest Airlines, Completed June 27, 2012 (to be published). 11.Annies Inc. A Single-Product Company Analyzed using a New Methodology, http://www.scribd.com/doc/98652561/Annie-s-Inc-A-SingleProduct-Company-Analyzed-Using-a-New-Methodology Published June 29, 2012 12.Google Inc. A Lovable One-Trick Pony Another Single-product Company Analyzed using the New Methodology. http://www.scribd.com/doc/98825141/Google-A-Lovable-One-Trick-PonyAnother-Single-Product-Company-Analyzed-Using-the-New-Methodology, Published July 1, 2012. 13.GT Advanced Technologies, Inc. Analysis of Recent Financial Data, Completed on July 4, 2012. (To be published). 14.Disappearing Brands: Research in Motion Limited. An Interesting type of Maximum Point on the Profits-Revenues Graph http://www.scribd.com/doc/99181402/Research-in-Motion-RIM-Limited-WillDisappear-in-2013 Published July 5, 2012.

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About the author V. Laxmanan, Sc. D.

The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the ground-based experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by
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Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law, as we see here, and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton.

Cover page of AirTran 2000 Annual Report

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Financial Statements for research in motion (RIMM)

http://www.wipo.int/export/sites/www/academy/en/ipacademies/educational_mater ials/cs2_blackberry.pdf Blackberry: A Teaching Case for WIPO by Intellectual Property Research Institute of Australia, http://www.ipria.org October 2008, Melbourne Law School, by David Weston and Dr. Kwanghui Lim; also includes financial data for RIM from 2000 to 2007. Document discusses patent infringement case against RIM which threatened to shut down the Blackberry communications entirely. http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=rimm Annual and Quarterly reports from 1998 to present http://www.RIM_EN-2006.pdf 2006 RIM Annual Report 2004-2006 data

http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker= RIMM:US http://www.fool.com/quote/NASDAQ/research-in-motion-limitedusa/RIMM/financial-statements Year-over-year, Research In Motion Limited has seen revenues fall from $19.9B to $18.4B. This along with an increase in the cost of goods sold expense has led to a reduction in the bottom line from $3.4B to $1.2B.
Currency in Millions of US Dollars As of: Feb 282009 Restated Feb 27 2010 Restated Feb 26 2011 ReclassifiedMar 03 2012 4 YearTrend Revenues TOTAL REVENUES NET INCOME 11,065.0 14,953.0 19,907.0 18,435.0 11,065.0 14,953.0 19,907.0 18,435.0 1,893.0 2,457.0 3,411.0 1,164.0

http://www.marketwatch.com/investing/stock/RIMM/financials/income/quarter Quarterly 5 recent

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