RIM Shares Spike On Takeover Talk
With more takeover rumours roiling around Research In Motion and lifting its stock price, analysts said Wednesday there's little chance the struggling BlackBerry maker will be acquired in the near future.
"I think from the board's perspective, which tends to be friendly to the co-CEOs, they will want to give them a chance because six months ago this was a $50 stock," William Blair & Co. analyst Anil Doradla said.
Reuters reported Tuesday that Internet retailer Amazon.com recently approached RIM to discuss a takeover, but the Canadian company rejected the move.
In the past, Microsoft and Nokia also dabbled in potential offers, but they were also rebuffed by RIM. Samsung, a growing player in the smartphone market, also has been named as a potential suitor.
National Bank Financial analyst Kris Thompson said Amazon, Microsoft or Nokia aren't likely to rescue RIM.
"We continue to view near-term mergers and acquisitions for RIM as very unlikely given the company's dismal performance and uncertain outlook," Thompson said in a research note.
Despite the analysts' assessments, RIM shares closed up nearly 10 per cent or $1.27 at $14.17 on the Toronto Stock Exchange following the news about Amazon.
RIM (TSX:RIM) has disappointed investors recently with the delay of its next generation of BlackBerry smartphones until late 2012 and disappointing financial results.
BMO Capital Markets analyst Tim Long said an acquisition is unlikely due to RIM's business model.
RIM makes the operating system and puts it into its own handset, delivering a complete product. It's also a service provider to its corporate customers with secure, encrypted email.
"RIM is the only hybrid equipment manufacturer and service provider," Long wrote in a note.
Activist shareholder Vic Alboini said the company will either be acquired as is, or broken up and sold.
Alboini, president and chief executive of merchant bank Jaguar Financial, said the smartphone handset business should be sold because that's where RIM has lost its competitive edge, saying it's worth only about $2.5 billion to $3 billion.
The Canadian company has been losing marketshare to Apple's iPhone and Android smartphones. RIM saw its share of the U.S. smartphone market fall to about 10 per cent this year.
RIM's ability to deliver secure email securely to BlackBerry smartphones should be opened up to iPhone, Android and other smartphones users, he said.
"Nobody else has that business," Alboini said, adding that would up RIM's technology to ultimately billions of smartphone users.
"It's that business that should be opened up to all global smartphone users. They should essentially get a BlackBerry application on their phone so they would have the same push email, the same encryption and security that is afforded to BlackBerrry users."
Alboini reiterated that RIM needs a new CEO and an independent board chairman, not Jim Balsillie and Mike Lazaridis as co-CEOs and co-chairmen.
"If you don't change the top, you're really not going anywhere," said Alboini, who added that he
Alboini and his supporters make up almost 10 per cent of RIM's shareholders and he said that is expected to grow.
J.P. Morgan analyst Rod Hall said RIM's shares are down 78 per cent year-to-date and it's unlikely the company would pursue any strategy to be acquired.
"The company has already stumbled on launching BlackBerry 10 and needs to focus on executing and closing a significant product gap rather than being distracted with M&A," Hall said in a note.
The company recently reported that its quarterly profits plunged to US$265 million, a steep drop from $911 million in the same three-month period last year.
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