Wasted Research, Downward Motion
With its shares down 71 percent since February and its lucrative enterprise customer base still largely intact, Research In Motion might seem a likely acquisition target. But speculation about a possible takeover is misplaced. As I’ve written before, implicit in the phrase “takeover target” is the idea that someone actually desires the target in question. And in RIM’s case, it’s not at all clear that’s true.
In fact, according to Bernstein Research analyst Pierre Ferragu, it’s probably not.
“On the one hand, we must admit RIM is today a bargain in many respects, and we can imagine new directions to get the company out of its current corner,” Ferragu writes in a research note to clients today. “On the other hand, we don’t see any likely buyer out there, and a change in strategy or management is unlikely.”
Try as he might, Ferragu just can’t conceive of a situation in which someone steps forward to rescue RIM from its fast-accelerating downward spiral. Not HTC. Not Samsung. Not Microsoft. Not Google.
“We see no likely buyer for RIM today,” says Ferragu. “HTC does not have the balance sheet required for an all-cash acquisition and we believe RIM’s board would be unlikely to approve a share swap offer. We believe that Microsoft still sticks to its ‘no hardware’ policy in terms of acquisition in the mobile space. Samsung and Apple are unlikely to look closely at the opportunity as they don’t really need it and probably see as much value in letting RIM continue to lose ground than in attempted a hostile and complicated acquisition. Lastly, we do not think Google has any appetite for acquiring any hardware business. Motorola Mobility was an exception to the rule solely driven by Motorola’s patent portfolio.”
And with its leadership so firmly entrenched and unyielding (co-CEOs Lazaridis and Balsillie control more than 10 percent of the company’s stock), activist investors aren’t likely to step in here, either.
In other words, RIM is on its own. Which, sadly, means its deterioration will likely continue unchecked.
Says Ferragu, “The window of opportunity for RIM to fix its product portfolio is most likely gone. RIM has been completely routed in high-end smartphones. The company’s market share of 18 percent in this segment in the first calendar quarter of 2010 declined to just 8 percent in the first quarter of 2011. The Blackberry brand is challenged by competition of superior branded phones on an expanding turf, from the very high end to lower and lower price points. It is also likely to face increasing pressure on corporate customers as well.”