RIM Pares Gains as Analysts Say a Buyout Bid Is Unlikely
Research In Motion Ltd. (RIMM), maker of the BlackBerry smartphone, pared gains in Nasdaq trading after analysts said a buyout is unlikely as company executives focus on guiding their own turnaround.
As long as Co-Chief Executive Officers Jim Balsillie and Mike Lazaridis keep telling investors they’re determined to engineer a recovery by themselves, buyers will be wary, said Stuart Jeffrey, a Nomura Securities analyst.
“Management is unwilling to do a deal in the immediate future,” said Jeffrey, who is based in New York and rates RIM shares “neutral,” in a research note today.
RIM rose 10 percent to $13.78 at the New York close, the most since Oct. 5, after touching $14.14. The Waterloo, Ontario- based company’s stock has jumped at least 5 percent 10 times since the beginning of August on speculation that its stumbles and decline in valuation invite a takeover.
Today’s increase followed a Reuters report yesterday that Amazon.com Inc. (AMZN) had considered a bid for RIM, and a Wall Street Journal report yesterday that Microsoft Corp. (MSFT) and Nokia Oyj (NOK1V) also had mulled one. RIM had dropped 78 percent this year through yesterday.
“There is only one clear beneficiary of the current takeover noise: the excessively de-rated RIM shares,” said Alexander Peterc and Alexandre Faure, analysts at Exane BNP Paribas, in a note today. They have a “neutral” rating on RIM.
No Management Shakeup
Balsillie and Lazaridis together own more than 10 percent of RIM and are its co-chairmen. While Jaguar Financial Corp. (JFC) has called on RIM to shake up management and name an independent chairman, the two men didn’t discuss any plans for leadership changes during a conference call on earnings last week.
“We are more committed than ever to addressing the issues at hand,” Balsillie said on the Dec. 15 call.
RIM’s effort to move its smartphones to a platform called BlackBerry 10 also may be impeding bidders by keeping RIM busy. The transition has run into delays, and Lazaridis said last week that the first BB10 phones won’t be available until the “latter part” of 2012.
“It is unlikely RIM will pursue strategic action prior to launching BlackBerry 10,” said Rod Hall, a San Francisco-based JPMorgan Chase & Co. (JPM) analyst with a “neutral” rating on RIM, in a note today. “The company needs to focus on executing and closing a significant product gap rather than being distracted with M&A,” or mergers and acquisitions.
RIM “turned down takeover overtures” from Amazon because it wanted to fix shortcomings independently, Reuters reported yesterday. The Wall Street Journal said Microsoft and Nokia “flirted with the idea of making a joint bid” in recent months. Both publications cited unidentified people familiar with the respective matters.
That Amazon would be interested doesn’t make sense, given that its mainstay is consumers and that RIM’s strength is with business customers, Nomura’s Jeffrey said in his note. Amazon’s Kindle Fire tablet appears to be a hit, while RIM’s PlayBook has been a dud, he said.
RIM shipped 150,000 PlayBooks last quarter. The Fire, similar in size to the PlayBook, may sell 3.9 million units in its first quarter on sale, according to researcher IHS ISuppli.
“It is difficult to see why Amazon would be attracted to RIM’s tablet business,” Jeffrey said.
Microsoft declined 1 percent to $25.76 at the New York close. Nokia rose 0.5 percent to 3.66 euros in Helsinki. Amazon.com fell 4.5 percent to $174.35.
Microsoft looked at making a joint bid with Nokia for RIM, the Journal reported, citing a person with knowledge of the matter who asked not to be identified because the talks were private. The proposal, which included Nokia taking on RIM’s hardware business, was discussed informally and wasn’t taken to the board level, the person said, according to the Journal.
Jamie Ernst, a spokeswoman for RIM, declined to comment yesterday, as did Mary Osako, a spokeswoman for Seattle-based Amazon, and Peter Wootton, a spokesman for Redmond, Washington- based Microsoft. Nokia doesn’t comment on speculation, said Doug Dawson, a spokesman for the Espoo, Finland-based company.
RIM trades at 3.12 times earnings, the lowest of any communications-equipment maker with a market capitalization greater than $1 billion, according to data compiled by Bloomberg.
The status of discussions between Microsoft and Nokia was unclear, according to the Journal. Amazon hired an investment bank to review a possible deal with RIM, without making a formal offer, Reuters said.
Microsoft and Nokia might be able to use RIM in their rivalry with Apple Inc. (AAPL), the largest smartphone maker. Amazon is also vying with Apple in the tablet market.
Nokia started selling the 420-euro Lumia 800, its first device running Microsoft’s Windows Phone software, in November in Europe. Nokia Chief Executive Officer Stephen Elop teamed up with Microsoft to compete with touch screens from Apple and vendors of handsets using Google Inc.’s Android system.
Mats Nystroem, a Stockholm-based analyst at SEB Enskilda, said an acquisition of RIM wouldn’t make sense for Microsoft and Nokia.
“Microsoft is pushing Windows through Nokia, why would they include another operating system from RIM that is inferior and not competitive?” he said in a phone interview. He has a “hold” rating on Nokia.
At Robert W. Baird & Co., the rating is “underperform.” Combining RIM’s BB10 with Microsoft’s Windows Phone 7 “would be messy at best,” said William Power, a Baird analyst, in a note to clients today.
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