Research In Motion: Vulnerable to a Takeover Bid? Part 2
The original post (”Does RIM’s weak share price bring on a takeover bid?” October 8-08) has generated lots of buzz, and I wanted to add a few points for further grist for the mill:
- I started writing the original post at 4:17 a.m. (woke up when the neighbor’s home alarm went off) or so Wednesday morning, but the post ran around 9:39 a.m. on Wednesday.
- At that point, Research In Motion (RIMM) was trading around C$60.
- For the good of the Canadian tech ecosystem, I don’t want the notional Microsoft (MFST)/RIM M&A deal to happen, and made that point crystal clear in the original post.
- Obviously, Jim and Mike are crucial to RIM’s success (as I said in the original post), and as Duncan Stewart reminded Reuters on Thursday. However, despite their large share holdings they don’t own enough of the company to be able to block a hostile takeover if their institutional shareholders wanted to tender.
- Naturally, MSFT would want (need?) Jim and Mike to stay with RIM going forward, but it isn’t clear if MSFT believes anyone in the world is essential to any business; Bill Gates recently stepped back from a daily executive role at MSFT, didn’t he?
- Moreover, it appears to all shareholders that Jim and Mike currently work not for the money but for the joy of it. If MSFT could ensure that would continue, why would they not want to stay with RIM if it were a subsidiary of MSFT? Would they threaten to walk out the door and work on their charities, try their hand at another start-up, or take up professional golf or tennis? Perhaps, and I can have no possible insight into what are referred to as “soft issues” in the M&A world. However, does MSFT come across as a firm that would let one or two individuals stand in the way of their strategic desires?
- The NASDAQ started to rise out of the blocks on Wednesday, taking RIM and Apple (AAPL), among others, along with it.
- IBM (IBM) reported decent earnings and outlook on Wednesday, which added further fuel to the Tech bellwether fire.
- Although the NASDAQ took a pasting on Thursday (down 5.5%), firms such as Apple, Google (GOOG) and IBM held their own (lost less than 3%). Intel (INTC), Motorola (MOT) and Oracle (ORCL) took it a bit harder;
- Inexplicably, RIM closed up 2.5% on the NASDAQ (5% on the TSX given Thursday's drop in the CDN$).
The fundamental point of launching an opportunistic takeover bid is that the target’s share price must provide for some opportunism. RIM was really cheap at C$60 when the first post went up (by the way, there is no relationship between the stock price and my original post), but at C$68 it is a little less so. On the NASDAQ, it rallied from $54 to $59.
If MSFT had to throw up a 30% premium ($16 on $54 quote) to get the attention of RIM’s institutional shareholders of RIM, $5 of that premium just went out the window…making the deal idea not quite as well-timed as it was just 33 hours ago [from the time of writing].
This doesn’t mean that it still isn’t a smart move for MSFT, but it’ll be a bit less accretive to MSFT’s earnings than it would have been.
Disclosure: I own RIM.
Related Articles
|
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
Trading Center
- Free E-Newsletters
- About Seeking Alpha
- About Us
- Contact Us
- What's New
- Readers Feedback
- Advertise With Us
- Contributors
- Contribute an Article
- Feature Your Book
- Our Contributors
- Anonymous Contributions
- Dispute an Article?
- Legal
- Terms of Use
- Privacy
- Copyright
This article has 5 comments:
- weasel
- 3 Comments
Oct 10 01:20 PM- sick of idle speculators
- 1 Comment
Oct 10 03:04 PMRIM are one of the strongest companies in the world - have been for years and without any help from Gates & Co.
- marketwatchr
- 36 Comments
Oct 10 04:48 PM- bryanz
- 52 Comments
Oct 11 03:28 AMWhere's the synergy anyway? You're talking about two wholly disparate smartphone platforms in BB OS and Windows Mobile. Integrating those seems like a logistical nightmare. Would MSFT just keep two separate platforms and sell Blackberrys and Treos?
I mean I understand its a rough market but it's not like RIMM is knocking on death's door here. They aren't desperate for a buyer, they've got the Storm coming out soon, they've got the successor to the Curve coming out sometime in Q4 of this year... They're maintaining their enterprise and business market while expanding into the consumer space. Smartphones are replacing regular phones as people realize they can have things like small devices with full or near-full keyboards, brilliant screens, WiFi, GPS, etc.
RIMM and AAPL are the leaders in the smartphone market for a reason, and they'll both continue to stay that way for the foreseeable future.
- Peter Lynch
- 37 Comments
Oct 11 10:08 AMRIMM is last cycle's story, just like Yahoo and Cisco before the tech crash in 2000. RIMM will still be around but its best days are behind her.
More by Mark McQueen