By Wojtek Dabrowski - Analysis
TORONTO (Reuters) - The recent plunge in the market value of BlackBerry maker Research In Motion could leave the company vulnerable to a takeover from a well-capitalized buyer such as Microsoft Corp.
RIM’s shares, which were worth more than $148 on the Nasdaq market just four months ago, now are trading around the $60 mark amid the U.S. financial crisis and margin pressures the company is experiencing because of expenses related to launching new smartphones.
Microsoft, meanwhile, is striving to remain competitive against Internet mammoth Google Inc, which has made recent forays into mobile phone technology, and against Apple Inc, the maker of the popular iPhone.
“RIM is a massive strategic fit” for Microsoft, said Canaccord Adams analyst Peter Misek. “I‘m fairly certain they have a standing offer to buy them at $50 (a share).”
In that scenario, RIM would have to continue declining to at least $40, thus allowing an offer of $50 to stand as a premium bid.
At current levels of $60 a share, RIM has a market value of about $34 billion. An offer of $50 a share would value the company at just over $28 billion.
Microsoft had no comment.
Rumors of Microsoft’s interest in Waterloo, Ontario-based RIM have swirled in the past, but no deal has ever materialized. A marriage of the two companies would bring together two of the best-known high-tech names in the world and give Microsoft a formidable wireless-handset presence through access to RIM’s roughly 20 million BlackBerry subscribers.
Microsoft has the balance-sheet strength to do such a deal, with $23.6 billion in cash, cash equivalents and short-term investments as of June 30. That, combined with an equity component, would mean it could avoid the debt markets in financing an offer.
“If you did a stock and cash deal, you wouldn’t need to tap the credit markets,” said Mark McQueen, chief executive of Wellington Financial LP in Toronto.
If an offer with a significant premium materialized, some investors could find it hard to resist, he said, even though RIM stock is currently trading at depressed levels.
“The people I’ve talked to who deal with institutional investors every day say they would look at this as a gift,” McQueen said. “In this particular climate, you have to part with your loved ones sometimes.”
It’s possible that Mike Lazaridis and Jim Balsillie, the co-CEOs of RIM, could try to resist a takeover, preferring instead to stand as an independent company.
“Jim and Mike are a serious part of the show,” said Duncan Stewart, president of Duncan Stewart Asset Management. “It would be tough to do a hostile deal on RIM.”
The two men have steered the company from its infancy through its growth stages and into its emergence as one of the best known smartphone manufacturers in the world.
Still, McQueen said, if Microsoft offered the two CEOs several billion dollars for their stake and then asked them to stay on to help continue growing the company’s business, “that might be a compelling proposition compared to taking up golf and retiring.”
Reporting by Wojtek Dabrowski; editing by Rob Wilson