The stock price for BlackBerry maker Research in Motion dropped US$1.24 in heavy trading Monday, to US$26.67, and even more after hours, to its lowest point in five years. That makes the stock a bargain for a buyer, but there's one problem with the renewed talk of a RIM takeover:
Who would buy it? And why?
"Once you take Microsoft off the table, there really isn't anyone else," says Chris Antlitz, analyst, networking and mobility practice, Technology Business Research, a market researcher in Hampton, N.H. "RIM still has a market valuation of US$14 billion. Figure a premium to bring it to US$17-18 billion, and not many companies can afford that."
The stock drop, more than 4 percent, was the market's reaction to RIM's announcement that it would lay off 6,000 workers, about 11 percent of its workforce. But the move was widely regarded by analysts as at best a temporary adjustment that didn't address the real problem: RIM's difficulty in coming up with innovative, best-selling mobile products, hardware and software, that can compete more effectively against Apple and a rising tide of handset makers betting on an Google's Android operating system.
For more than a year, there's been speculation that Microsoft might acquire RIM because both rely heavily on, and are strong in, the enterprise market. TBR's Antlitz also thought Microsoft could leverage RIM's client-server software platform to sell a range of new cloud services.
But Microsoft's deal with Nokia, in which Nokia scuttled its internal mobile OS plans for smartphones in favor of Microsoft's Windows Phone 7, makes a RIM buy much less compelling for Microsoft, Antlitz says [see "Both Nokia, Microsoft have much to gain, and lose, in mobile deal"].
"Microsoft now is more likely to buy Nokia than RIM, simply because of how they are now," he says. "Microsoft could pay a few more billion for Nokia than for RIM, but they'd be getting more bang for the buck. I want to emphasize that is not a probable acquisition."
That doesn't leave many candidates, he says. Chinese handset makers ZTE and Huawei might be possibilities, especially as Nokia has long dominated the China market. "I don't see that," Antlitz says. "These two companies are all in with Android, and they're targeting the US$150-or-less smartphone market."
HP, IBM and even Cisco have the size and money to buy RIM, but not a strategic need to do so, Antlitz says. HP bought Palm last year for US$1.2 billion, and is determined to make Palm's webOS a strategic mobile success [See "Q&A on HP's buyout of Palm"]. IBM is "more about services and ecosystems," he says.
"We don't see anyone with a grand plan to leverage the RIM platform and its installed base, beyond just selling handsets," Antlitz says.
And the depressed stock price doesn't change those strategic realities. In late June and early July there was already renewed talk of RIM's stock being a bargain. "In 2008, RIM had a market capitalization in excess of US$80 billion, making it the most valuable Canadian company by stock value. This figure has now dropped to a paltry US$15.12 billion as of today," noted one published analysis.
In the meantime, there seems to be widespread agreement that this week's layoffs may provide some short-term benefit but that RIM can't be successful, or profitable, by relying only on cost controls.
Analyst Shaw Wu at Sterne Agee, quoted in Mark Gongloff's MarketBeat blog for The Wall Street Journal, doubted the layoffs would help in the long run: "The reason is that RIM has already had a tough time executing on product cycles [including recent hardware, touchscreens, the QNX operating system and the PlayBook tablet] that one has to wonder if they can do better with less headcount."
Rod Hall at J.P. Morgan, quoted in the same article, put it even more baldy: "We see the cuts as positive, but ultimately we believe RIM must produce competitive product to stabilize recent share losses."
RIM also made some small changes in its top management. Chief Operating Officer Don Morrison, who has been out on medical leave, is retiring, a move that is not a surprise. His job is being split between two other executives, mirroring the co-CEO relationship at the top. Thorsten Heins will become COO of product and sales, and Jim Rowan will take over as COO of operations.
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