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A RIM takeover would be a bumpy ride for the buyer

Posted: , by Alan F.

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A RIM takeover would be a bumpy ride for the buyer
With a number of companies kicking the tires on the car known as Research In Motion, a takeover bid for the company is possible. But getting a bid to succeed is a different kettle of fish considering that the executive team of Mike Lazaridis and Jim Balsillie together are the largest stockholders in the company. Still, with the stock down 75% since February, they might be the only stockholders not ready to throw out management. As Colin Gillis, an analyst at BGC Partners said, "Before you talk about a buyer, you have to ask: do you have a seller?”  Lazaridis and Balsillie combined own more than 10% of the company. Other top shareholders are the Bank of Montreal and the Royal Bank of Canada and both might want to avoid a foreign takeover of RIM so as to escape the wrath of Canadian citizens who might complain that the banks were selling out one of Canada's top tech firms to another country.

The advantage to a buyer is that with much of the stock in the hands of fast moving funds always in search of a quick profit, a buyer offering a nice premium to the current price might be able to wrest away a majority of the stock, vote in a new board, and send the co-CEO's out on the pavement looking for a new job. But it is not going to be easy.

RIM's co-CEOs Balsillie and Lazaridis

RIM's co-CEOs Balsillie and Lazaridis

It's not like RIM isn't making money. For the first nine months of the year, the company earned $1.29 billion. But the problem is that BlackBerry is seen as outdated, even by the business community that once stood by the push email and highly regarded BlackBerry Messenger system for so long. The stock's drop to $14.34 from a 52 week high above $70 reflects mistakes and problems that have haunted the company for more than a year. From the poor selling BlackBerry PlayBook tablet, launched with no email client nor a calendar, to the delay in launching the new line of SuperPhones, it has not been a good year for RIM. And as we close the book on 2011, RIM was sued to stop using the BBX name it wanted to call its new OS (now anointed BlackBerry 10) and to stop calling BlackBerry Messenger by the long time BBM abbreviation. And we can't forget the class action suit that was filed by RIM users after an outage that circled the globe over the period of a few days, left those relying on their BlackBerry without service.

What has hurt the most though, has been RIM's decline in the smartphone market where its BlackBerry models are no longer seen as offering the latest technology. Compared with the Apple iPhone and Android, the top-of-the-line BlackBerry 9900/9930 has no front facing camera, no YouTube client (the phone's YouTube button merely re-directs the user to You Tube's mobile web site), a much less stocked online application store and no dual-core processors. These are features that iOS and Android users are currently enjoying.

So what could RIM fetch in a buyout? Evercore Partners analyst Alkesh Shah puts a value of $22.50 for the stock, even assuming that the company's handset business is worthless. Shah puts a value of $12.50 on RIM’s network, which carries global traffic worldwide and collects monthly subscription fee. RIM's patents are worth $7.50 a share and the company has $2.50 a share in cash. But even a bid in that ballpark would cost in the range of $10-$13 billion which is a lot of money to spend on a company that is falling so far behind its competitors. Amazingly enough, we reported on possible RIM takeover rumors back in 2010 and at the time, with the stock $55, we figured it would take as much as $50 billion to buy the company.

While some big tech names have been linked to a buyout of Canadian based RIM like Microsoft, Amazon and Nokia, nothing has apparently has made it through the exploratory stage. The New York Times brings up the possibility of China's ZTE adding to its position as the fourth largest handset manufacturer on the planet, a possible suitor that the newspaper has brought up before. If there is going to be a buyer for RIM, Lazaridis and Balsillie will need to be dealt with. Adnaan Ahmad, an analyst with Berenberg Bank in London, says the pair is suffering from "founder's syndrome" which makes them unwilling to take the company in new directions. The pair did cut their salary for this year to $1 each as a good will gesture to stockholders.
 
Usually when it comes to the takeover of a listed company, money talks. Whether it is a financial company like KKR that would buy the company, cut out the fat and leverage it to the hilt, or a company in the industry like Amazon seeking to add smartphones right next to its ultra-successful Kindle Fire tablet, once a bid is announced, it will turn into a circus. If you thought that AT&T's proposed purchase of T-Mobile for $39 billion was wild, you ain't seen nothing yet!

Whomever is interested in buying RIM has two huge bumps in the road. The first one is to somehow take the company away from its co-CEO's, and the second one is turning RIM around into a smartphone powerhouse. Both are equally difficult and there is no point in doing the first without succeeding in the second. Perhaps this is why we have yet to see a real bid develop for RIM.

source: NewYorkTimes

14 Comments
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posted on 29 Dec 2011, 23:30 4

1. christianqwerty (Posts: 460; Member since: 05 May 2011)


I really hope Blackberry doesn't die. They may not have the newest technology or the hippest names, but they are reliable. DONT GIVE UP RIM

posted on 30 Dec 2011, 00:01

2. Droid_X_Doug (Posts: 5281; Member since: 22 Dec 2010)


Who in their right (or wrong) mind would buy RIM?

posted on 30 Dec 2011, 00:33 1

3. alecgale (Posts: 55; Member since: 29 Jun 2011)


I'd buy rim (jobs) jk

posted on 30 Dec 2011, 00:45

4. digicon (Posts: 109; Member since: 11 Aug 2011)


Just to make a point , they do have a YouTube client dedicated to RIM . Also, I think that price quote leaves out all of the companies and businesses that RIM owns , plus all the majority investments in other areas they share . RIM is too big . . .

posted on 30 Dec 2011, 00:46 3

5. Glim12808 (Posts: 391; Member since: 26 Oct 2011)


The article makes it seem so grim for RIM. So if I were a mere employee of the company, I'd probably have very little to look forward to in the coming new year.
Hope somehow RIM finds a way to reverse the downward spiral.

posted on 30 Dec 2011, 01:18

6. derricob (Posts: 24; Member since: 18 Jul 2010)


Next year, RIM should start selling off their patents, investments, and companies they acquired little by little to other companies. After that they should be able to sell RIM itself to buyers. The CEOs will be able to get out of the technology game and just enjoy life as an outsider. If they stay in the game, they'll be bankrupted in 2-3 years

posted on 30 Dec 2011, 06:06 3

7. henrickrw (Posts: 402; Member since: 16 Sep 2011)


DONT GIVE UP RIM

posted on 30 Dec 2011, 10:51 1

8. remixfa (Posts: 13902; Member since: 19 Dec 2008)


I could turn that company around within 2 years. Its not that hard. Fire those bungling idiots, redirect all money towards making 10 the best OS out there... give big incentives for App development to get that app store to fill up quickly.. , foster partnerships for better tech like 12mpx + cameras, dual core chips, ect... invest in battery tech to try to keep that "blackberry battery life" as close as possible, and advertise like a mofo. Within 6-8 months you launch a new "flagship" phone that is at a bare minimum of 4.2 inches in screen length, LTE, ect ect ect to turn heads back towards RIM. Relaunch the bold with 10, kill the curve and bold touch, relaunch the torch with 10 and similar specs to the flagship... then double it up in 6 more months. 6 quiet months of development time + 18 months of hard core selling and advertising and pushing the envelope and updates. The bold is your "base" phone for corporate power users that need battery life, the Torch is the happy middle, and the new flagship is obviously the top for the iphone/sgs2 crowd. RIM would be up at least 10-20% from where they are now.
Its really not that hard. lol.

posted on 30 Dec 2011, 12:33

9. Droid_X_Doug (Posts: 5281; Member since: 22 Dec 2010)


@remixfa - all of what you suggest as being the turnaround plan takes time (and $) that RIM doesn't have. It is a dead man walking. The 2 year contracts are expiring and the customers are moving on to better handsets.

posted on 30 Dec 2011, 14:09

10. remixfa (Posts: 13902; Member since: 19 Dec 2008)


You didn't read the article did u. They make billions in subscription fees. They have high profit margins on their devices. They are making money. Its never over until they shut down. 6 months is a lot shorter than their current time table of stupidity. And my plan would work better than whatever ludacris plan they don't have.

posted on 30 Dec 2011, 15:15

11. Droid_X_Doug (Posts: 5281; Member since: 22 Dec 2010)


I did read the article. The problem for RIM is they can not afford to incur the expense level that your remedies would entail in the face of declining market share. Market share equals revenues and their revenues are declining. There is a reason why OS 10 (or whatever it is currently being called) is not going to ship on handsets until late 2012. It costs $ to figure out what is causing the problems and fix them so the handset doesn't brick up. Each month more 2 year contracts mature and based on the published metrics, more customers jump ship.

posted on 30 Dec 2011, 15:39

12. remixfa (Posts: 13902; Member since: 19 Dec 2008)


they can afford it. They make billions a year in revenue streams withoutneverbselling a phone. They also have the highest profit margin per device of everyone except apple. But the bulk of their revenue is corperate monthly subscription fees for access t o secure corporate email ... even if they never sell another phone they have years of revenue stream left. There is also dozens of ways tto raise additional capital and loans. You think sprint has all this money they are tthrowing around?? They are leveraging debt. Sometimes to get ahead you must first step back.

posted on 30 Dec 2011, 16:03

13. Droid_X_Doug (Posts: 5281; Member since: 22 Dec 2010)


Company subscription revenue is off from prior years. There is a reason RIM's share price is in the toilet.... Investors are voting with their feet about RIM's prospects for the future. Some of the more credible turnaround proposals I have seen involve RIM shedding the handset business and migrating the software/subscription business to Android and/or iOS.

posted on 30 Dec 2011, 22:10

14. snowgator (Posts: 3159; Member since: 19 Jan 2011)


We are all dumping dirt on RIM's graves for a good reason: They dug it themselves. They have very little focus, single minded leadership, the burden of developing both hardware and software at the same time after already falling behind on both, and an ever shrinking consumer base that was once the envy of even Apple. I would buy a Blackberry again, but it would not be anything like what they have now. I really think they are a potentially fantastic hardware company. But boy I am not believing they can ever compete in software development. Mobile moves too fast to do both these days. Somewhere down the road even Apple may be forced to that reality.

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