Research In Motion Ltd. (RIMM)’s enterprise-services unit, seen as the company’s most valuable asset, has attracted interest from International Business Machines Corp. (IBM), two people familiar with the situation said.
IBM made an informal approach about possibly acquiring the division, which operates a network of secure servers used to support RIM’s BlackBerry devices, said one of the people, who asked not to be named because the matter is private. The business may be valued at $1.5 billion to $2.5 billion depending on the mix of assets included, according to Berenberg Bank.
No party has shown interest in buying all of RIM or the division that makes its phones, and the Canadian company is inclined to wait for the rollout of BlackBerry 10 phones in early 2013 before making any decisions on a sale, the person said. No talks are currently under way, according to the person.
“If they were to offload this, they are offloading their jewel,” said Adnaan Ahmad, an analyst at Berenberg with a sell rating on RIM’s shares. “They want to give BlackBerry 10 a go, so I don’t think this would happen until next year.”
Chief Executive Officer Thorsten Heins, who took charge in January, is trying to turn the company around after customers defected to Apple Inc. (AAPL) and Google Inc. (GOOG)’s Android system, triggering losses and declining sales. The Waterloo, Ontario- based manufacturer said in May that it had hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to study strategic options. Heins has said he would prefer to find a partner or license RIM’s software to other companies, rather than pursuing a sale.
James Sciales, a spokesman for Armonk, New York-based IBM, said the company doesn’t comment on rumors or speculation, as did Nick Manning, a spokesman for RIM.
Splitting the enterprise unit from hardware would be difficult because the technology is so closely intertwined, said Peter Misek, an analyst at Jefferies & Co. in New York. Separated successfully, the enterprise unit may fetch $2 billion, said Misek, who rates RIM the equivalent of a sell.
Shaw Wu, an analyst at Sterne Agee & Leach Inc. in San Francisco, said the difficulties separating the unit will lead to a lower price, in the range of $1 billion to $1.5 billion. Modified to work with other platforms, it would be worth more, said Wu, who has a neutral rating on the stock.
IBM is the world’s largest provider of computer services to enterprises, and has made recent acquisitions in online commerce and human-resources software. RIM’s enterprise-service business would give IBM control of a secure and speedy e-mail system that’s preferred by many large corporations over more consumer- oriented products.
The fees RIM charged mobile carriers for subscriber access to its network generated revenue of $4.1 billion last year. RIM has $2.2 billion in cash and investments and little debt. If the enterprise-services division is worth about $2 billion, it would suggest the company’s mobile-phone business has little value to investors.
IBM buying some or all of RIM’s business is strategically sound as the enterprise unit would be a “logical extension” of IBM’s own services, said William Blair & Co. analyst Anil Doradla, who has the equivalent of a hold rating on RIM stock.
RIM, once the world’s leading smartphone maker, is racing to get the BlackBerry 10 lineup ready for its debut early next year, aiming to regain market share lost to Apple’s iPhone and Google’s Android operating system.
The new devices, which RIM says represent a total revamp of the company’s product line, have seen their introduction delayed twice as engineers struggle with their development. They will also need to attract third-party application developers, who currently focus on building software for more popular smartphones. Last month, the New York Times (NYT) newspaper dropped its downloadable application for BlackBerry models, which it will continue to offer for Apple and Google devices.
RIM is eliminating almost a third of its workforce and shutting down manufacturing sites to boost efficiency. Its share of the global smartphone market fell to 4.8 percent in the second quarter from 12 percent a year earlier as Android climbed to 68 percent and Apple slipped to 17 percent, according to research firm IDC.
The company reported a fiscal first-quarter loss in June of 37 cents a share, excluding some items, more than five times what analysts had predicted. Sales tumbled 43 percent to $2.8 billion, missing a prediction of $3.05 billion.