BlackBerry takeover? Wanna buy a bridge too?August 9, 2012: 1:01 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
I had dinner with a bunch of friends last night. One of them wanted to show me a picture from Facebook that my wife posted earlier in the day which I had not yet seen. He took out his phone ... a BlackBerry. After a minute or two of futzing around with it, he realized he wasn't going to get the mobile Facebook app to work. So he gave up ... and then happily confessed that he was soon going to be getting rid of the BlackBerry in favor of a new Galaxy S3 phone from Samsung.
That anecdote pretty much sums up why it makes absolutely no sense whatsoever for Samsung to buy BlackBerry maker Research in Motion (RIMM). The market share for the BlackBerry operating system has plummeted due to the popularity of Google's (GOOG) Android devices (Samsung is the clear leader in this camp) and Apple's (AAPL) iPhone. But some traders are still of the belief that RIM is eventually going to get bought.
The Samsung-RIM chatter resurfaced Wednesday, sending shares of RIM up 4% yesterday and another 2% today. Part of Thursday's rally may be due to a favorable ruling for RIM in a patent infringement dispute with Mformation Technologies. But investors should not buy into any of the M&A gossip.
For one, Samsung has repeatedly denied that it has any interest in buying RIM, or licensing its technology. Other takeover rumors are equally whimsical.
Faecbook? That's a laugh. Given how poorly Facebook's (FB) stock has done since its IPO due to concerns about its mobile strategy, investors might revolt if the company spent several billion dollars to buy a company that is widely viewed as an also-ran in the new mobile world.
There's also the little issue of what CEO Mark Zuckerberg clearly said during Facebook's first earnings call: Facebook wasn't interested in building a phone.
Microsoft (MSFT)? Sure, that rumor has been around for years. And it may have been a marriage made in heaven if it was done when RIM was still an industry leader and Microsoft was struggling to develop a mobile strategy.
But now that Microsoft has launched its own Windows Phone operating system and allied itself with Nokia (NOK), would Microsoft really want RIM -- arguably the only major smartphone company that is hurting more than Nokia -- as well? Microsoft can't cobble together a viable third alternative to Android and iOS with the industry's walking wounded.
Perhaps a wild card like Chinese networking firm Huawei, which has increased its brand awareness lately with a series of ads during the London Olympics, or Amazon (AMZN), which is rumored to be considering the development of its own smartphone, could swoop in and save RIM.
It's also possible that RIM could merely sell patents or other technology. After all, Google paid a lot of money for Motorola Mobility in a deal that was more about Motorola's intellectual property than its Droid phones and Xoom tablets.
But investors still pining for a RIM takeover need to remember three key things. First, RIM's management team is stubbornly sticking to the notion that the BlackBerry 10 will be the company's savior ... despite the fact that it's been delayed so many times that it's reasonable to wonder if it will be on the market by the time the Rio Olympics roll around in 2016.>
RIM may have a newish CEO. But Thorsten Heins is still a long-time insider at the company. He may not want his legacy to be the guy who threw in the towel.
Second, given how sharply RIM's stock has fallen, the company has little leverage in negotiating a deal.
Any company that actually still would be interested in buying RIM would be crazy to pay a huge premium -- especially since many in the industry scoffed at how much Google spent on Motorola. Keep in mind that when Palm, the company RIM is often compared to, finally sold out to Hewlett-Packard (HPQ), it was at a fraction of what it was once worth.
Finally, even if the Waterloo, Ontario-based RIM and a buyer were to agree on a deal, you can't underestimate the possibility that Canada's government would block it.
Two years ago, Australian mining giant BHP Billiton (BHP) was forced to give up on its efforts to buy Saskatchewan-based fertilizer firm Potash (POT) after Ottawa said no to the deal. It appeared that the Canadian government was wary of ceding too much control of its natural resources to a non-Canadian company.
And while smartphones may not be minerals, RIM is arguably the only major global tech firm in Canada following the demise of Nortel. So it would be understandable if the Canadian government was reluctant to approve any purchase of it by a foreign firm. In fact, regulators around the world might not look kindly on a deal since BlackBerries, despite losing appeal with consumers and businesses, are still favored by many government agencies because of their security features.
It's true that there is some value in RIM's assets. The company may avoid the "death spiral" that some of the most bearish analysts are predicting. But investors need to give up on the notion that the company is an attractive takeover target. It's not going to happen.