Category Archives: Apple

Divining Google’s Intentions for Motorola Mobility

In commenting now on Google’s announcement that it will acquire Motorola Mobility Holdings for $12.5 billion, I feel like the guest who arrives at a party the morning after festivities have ended: There’s not much for me to add, there’s a mess everywhere, more than a few participants have hangovers, and some have gone well past their party-tolerance level.

Still, in the spirit of sober second thought, I will attempt to provide Yet Another Perspective (YAP).

Misdirection and Tumult

It was easy to get lost in all the misdirection and tumult that followed the Google-Motorola Mobility announcement. Questions abounded, Google’s intentions weren’t yet clear, its competitors were more than willing to add turbidity to already muddy waters, and opinions on what it all meant exploded like scattershot in all directions.

In such situations, I like to go back to fundamental facts and work outward from there. What is it we know for sure? Once we’re on a firm foundation, we can attempt to make relatively educated suppositions about why Google made this acquisition, where it will take it, and how the plot is likely to unspool.

Okay, the first thing we know is that Google makes the overwhelming majority (97%) of its revenue from advertising. That is unlikely to change. I don’t think Google is buying Motorola Mobility because it sees its future as a hardware manufacturer of smartphones and tablets. It wants to get its software platform on mobile devices, yes, because that’s the only way it can ensure that consumers will use its search and location services ubiquitously; but don’t confuse that strategic objective with Google wanting to be a hardware purveyor.

Patent Considerations 

So, working back from what we know about Google, we now can discount the theory that Google will be use Motorola Mobility as a means of competing aggressively against its other Android licensees, including Samsung, HTC, LG, and scores of others.  There has been some fragmentation of the Android platform, and it could be that Google intends to use Motorola Mobility’s hardware as a means of enforcing platform discipline and rigor on its Android licensees, but I don’t envision Google trying to put them out of business with Motorola. That would be an unwise move and a Sisyphean task.

Perhaps, then, it was all about the patents? Yes, I think patents and intellectual-property rights figured prominently into Google’s calculations. Google made no secret that it felt itself at a patent deficit in relation to its major technology rivals and primary intellectual-property litigants. For a variety of reasons — the morass that is patent law, the growing complexity of mobile devices such as smartphones, the burgeoning size and strategic importance of mobility as a market — all the big vendors are playing for keeps in mobile. Big money is on the table, and no holds are barred.

Patents are a means of constraining competition, conditioning and controlling market outcomes, and — it must be said — inhibiting innovation. But this situation wasn’t created by one vendor. It has been evolving (or devolving) for a great many years, and the vendors are only playing the cards they’ve been dealt by a patent system that is in need of serious reform. The only real winners in this ongoing mess are the lawyers . . . but I digress.

Defensive Move

Getting back on track, we can conclude that, considering its business orientation, Google doesn’t really want to compete with its Android licensees and that patent considerations figured highly in its motivation for acquiring Motorola Mobility.

Suggestions also surfaced that the deal was, at least in part, a defensive move. Apparently Microsoft had been kicking Motorola Mobility’s tires and wanted to buy it strictly for its patent portfolio. Motorola wanted to find a buyer willing to take, and pay for, the entire company. That apparently was Google’s opening to snatch the Motorola patents away from Microsoft’s outstretched hands — at a cost of $12.5 billion, of course. This has the ring of truth to it. I can imagine Microsoft wanting to administer something approaching a litigious coup de grace on Google, and I can just as easily imagine Google trying to preclude that from happening.

What about the theory that Google believes that it must have an “integrated stack” — that it must control, design, and deliver all the hardware and software that constitutes the mobile experience embodied in a smartphone or a tablet — to succeed against Apple?

No Need for a Bazooka

Here, I would use the market as a point of refutation. Until the patent imbroglio raised its ugly head, Google’s Android was ascendant in the mobile space. It had gone from nowhere to the leading mobile operating system worldwide, represented by a growing army of diverse device licensees targeting nearly every nook and cranny of the mobile market. There was some platform fragmentation, which introduced application-interoperability issues, but those problems were and are correctable without Google having recourse to direct competition with its partners.  That would be an extreme measure, akin to using a bazooka to herd sheep.

Google Android licensees were struggling in the court of law, but not so much in the court of public opinion as represented by the market. Why do you think Google’s competitors resorted to litigious measures in the first place?

So, no — at least based on the available evidence — I don’t think Google has concluded that it must try to remake itself into a mirror image of Apple for Android to have a fighting chance in the mobile marketplace. The data suggests otherwise. And let’s remember that Android, smartphones, and tablets are not ends in themselves but means to an end for Google.

Chinese Connection?

What’s next, then? Google can begin to wield the Motorola Mobility patent portfolio to defend and protect is Android licensees. It also will keep Motorola Mobility’s hardware unit as a standalone, separate entity for now. In time, though, I would be surprised if Google didn’t sell that business.

Interestingly, the Motorola hardware group could become a bargaining chip of sorts for Google. I’ve seen the names Huawei and ZTE mentioned as possible buyers of the hardware business. While Google’s travails in China are well known, I don’t think it’s given up entirely on its Chinese aspirations. A deal involving the sale of the Motorola hardware business to Huawei or ZTE that included the buyer’s long-term support for Android — with the Chinese government’s blessing, of course — could offer compelling value to both sides.

Nokia Channels Kris Kristofferson

In reporting that Nokia would discontinue North American sales of its Symbian smartphones and its low-end feature phones to focus exclusively on its forthcoming crop of smartphones based on Windows Phone, Ina Fried of All Things Digital broke some news that didn’t qualify as a surprise.

If Kris Kristofferson was right when he said that “freedom is just another word for nothing left to lose,” then Nokia has a lot of freedom in the North American smartphone market.

The Finnish handset vendor, which began its corporate life as a paper manufacturer, wasn’t going anywhere with its Symbian-based smartphones in the USA or Canada. What’s more, North Americans have been turning away from feature phones for a while now.  Accordingly, Nokia has chosen to clear the decks, eliminate distractions, and put all its resources behind its bet-the-company commitment to Windows Phone.

Nothing to Lose

It’ll keep Symbian and the feature phones around for a while longer in other international markets, but not in North America. And, you know, it makes sense.

If Nokia wins even a modicum of business with its Microsoft-powered smarphones, it will gain share in North America. From that standpoint, it has something to gain, and very little to lose, as it debuts its Windows Phone handsets in the North American market. Nokia doesn’t need to hit a home run to spin its Windows Phone as a success here. All it needs to do is show market momentum on which can build in other markets, including those where it truly does have more to lose.

Obviously, Nokia’s success should not be taken for granted. The company has a long, potholed road ahead of it, and there’s no guarantee that it will survive the journey.

Battle for Hearts and Minds

While some observers are saying the carriers will be crucial to Nokia’s smartphone success — the Finnish handset vendor will make its phones available through operators rather than selling them unlocked at retail — I disagree.

Once upon a time, mobile subscribers took the handsets that carriers pushed at them, but that hasn’t been the norm since Apple radically rearranged the smartphone landscape with the iPhone. Now, consumer demand determines which handsets wireless operators carry, and Nokia doubtless recognizes that reality, which is why it intends to launch a massive advertising and marketing campaign to persuade consumers that its smartphones are desirable, must-have items.

Low Expectations

Will it work? Hey, ask Nostradamus if you can reach him with a medium and a Ouija board. All I can tell you is that Nokia will have to nail its advertising campaign, hit the bull’s eye with its marketing programs, and work diligently in conjunction with Microsoft to attract the attention and support of mobile developers. Great phone designs, slick marketing, a credible mobile operating system (which Microsoft might finally have), and quality and quantity of application support will be essential if Nokia is to resuscitate its reputation as a serious smartphone player.

A lot can go wrong, and some of it probably will.

It’s not going to be easy, but the one thing Nokia has going for it in North America is low expectations. That’s why I think Nokia picked the continent as a potential springboard for its Windows Phone onslaught worldwide.

Why RIM Takeover Palaver is Premature

Whether it is experiencing good times or bad times, Research in Motion (RIM) always seems to be perceived as an acquisition target.

When its fortunes were bright, RIM was rumored to be on the acquisitive radar of a number of vendors, including Nokia, Cisco, Microsoft, and Dell. Notwithstanding that some of those vendors also have seen their stars dim, RIM faces a particularly daunting set of challenges.

Difficult Circumstances

Its difficult circumstances are reflected in its current market capitalization. Prior to trading today, RIM had a market capitalization of $11.87 billion; at the end of August last year, it was valued at $23.27 billion. While some analysts argue that RIM’s stock has been oversold and that the company now is undervalued, others contend that RIM’s valuation might have further to fall. In the long run, unless it can arrest its relative decline in smartphones and mobile computing, RIM appears destined for continued hardship.

Certainly, at least through the end of this year — and until we see whether its QNX-based smartphones represent compelling alternatives to Apple’s next crop of iPhones and the succeeding wave of Android-based devices from Google licensees — RIM does not seem to have the wherewithal to reverse its market slide.

All of which brings us to the current rumors about RIM and potential suitors.

Dell’s Priorities Elsewhere

Dell has been mentioned, yet again, but Dell is preoccupied with other business. In an era of IT consumerization, in which consumers increasingly are determining which devices they’ll use professionally and personally, Dell neither sees itself nor RIM as having the requisite consumer cache to win hearts and minds, especially when arrayed against some well-entrenched industry incumbents. Besides, as noted above, Dell has other priorities, most of which are in the data center, which Dell sees not only as an enterprise play but also — as cloud computing gains traction — as a destination for the applications and services of many of its current SMB customers.

In my view, Dell doesn’t feel that it needs to own a mobile operating system. On the mobile front, it will follow the zeitgeist of IT consumerization and support the operating systems and device types that its customers want. It will sell Android or Windows Phone devices to the extent that its customers want them (and want to buy them from Dell), but I also expect the company to provide heterogeneous mobile-management solutions.

Google Theory

Google also has been rumored to be a potential acquirer of RIM. Notable on this front has been former Needham & Company and ThinkEquity analyst Anton Wahlman, who wrote extensively on why he sees Google as a RIM suitor. His argument essentially comes down to three drivers: platform convergence, with Google’s Android 4.0 and RIM’s QNX both running on the same Texas Instruments OMAP 4400 series platform; Google’s need for better security to facilitate its success in mobile-retail applications featuring Near-Field Communications (NFC); and Google’s increasing need to stock up on mobile patents and intellectual property as it comes under mounting litigious attack.

They are interesting data points, but they don’t add up to a Google acquisition of RIM.

Convergence of hardware platforms doesn’t lead inexorably to Google wanting to buy RIM. It’s a big leap of logic — and a significant leap of faith for stock speculators — to suppose that Google would see value in taking out RIM just because they’re both running the same mobile chipset. On security, meanwhile, Google could address any real or perceived NFC issues without having to complete a relatively costly and complex acquisition of a mobile-OS competitor. Finally, again, Google could address its mobile-IT deficit organically, inorganically, and legally in ways that would be neither as complicated nor as costly as having to buy RIM, a deal that would almost certainly draw antitrust scrutiny from the Department of Justice (DoJ), the Securities and Exchange Commission (SEC), and probably the European Union (EU).

Google doesn’t need those sorts of distractions, not when it’s trying to keep a stable of handset licensees happy while also attempting to portray itself as the well-intentioned victim in the mobile-IP wars.

Microsoft’s Wait

Finally, back again as a rumored acquirer of RIM, we find Microsoft. At one time, a deal between the companies might have made sense, and it might make sense again. Now, though, the timing is inauspicious.

Microsoft has invested significant resources in a relationship with Nokia, and it will wait to see whether that bet pays off before it resorts to a Plan B. Microsoft has done the math, and it figures as long as Nokia’s Symbian installed base doesn’t hemorrhage extravagantly, it should be well placed to finally have a competitive entry in the mobile-OS derby with Windows Phone. Now, though, as Nokia comes under attack from above (Apple and high-end Android smartphones) and from below (inexpensive feature phones and lower-end Android smartphones), there’s some question as to whether Nokia can deliver the market pull that Microsoft anticipated. Nonetheless, Microsoft isn’t ready to hit the panic button.

Not Going Anywhere . . . This Year

Besides, as we’ve already deduced, RIM isn’t going anywhere. That’s not just because the other rumored players aren’t sufficiently interested in making the buy, but also because RIM’s executive team and its board of directors aren’t ready to sell.  Despite the pessimism of outside observers, RIM remains relatively sanguine about its prospects. The feeling on campus is that the QNX platform will get RIM back on track in 2012. Until that supposition is validated or refuted, RIM will not seek strategic alternatives.

This narrative will play out in due course.  Much will depend on the market share and revenue Microsoft and Windows Phone derive from Nokia. If that relationship runs aground, Microsoft — which really feels it must succeed in mobile and cloud to ensure a bright future — will look for alternatives. At the same time, RIM will be determining whether QNX is the software tonic for its corporate regeneration. If  the cure takes, RIM won’t be in need of external assistance. If QNX is no panacea, and RIM loses further ground to Apple and the Google Android camp, then it will be more receptive to outside interests.

Those answers will come not this year, but in 2012.

On Further Review, the Cius Still Looks Doomed

I’m returning to the topic of the Cisco Cius, but I promise I won’t make it an obsession.

My view of the commercial prospects for the Cius has shifted significantly during the past year, from when Cisco first announced the pseudo-tablet to now, as it prepares to ship the device, presumably in something approximating volumes. Back in the summer of 2010, I thought the Cisco Cius might have a fighting chance of currying favor within the company’s installed base, playing to IT decision makers with a practical and broad-based extension of its video-collaboration strategy.

Changing Landscape

Some things have changed since then. The Apple iPad franchise, as we all know, has gone from strength to strength. iPads now proliferate in small businesses and enterprises as well as in homes. They’ve crossed the computing rubicon from the consumer realm to the business world. They, like iPhones and other smartphones, also have helped to engender the much-discussed “consumerization of IT,” whereby consumers have insisted on bringing their favorite devices to the office, where they have been gradually and grudgingly accepted by enterprise IT departments under imperatives from CFOs to bring down IT-related capital and operating expenses.

That has cut into Cisco’s appeal. Cisco, as a big old-school enterprise player, didn’t count on consumerist employees having any appreciable say in the navigation of the enterprise IT ship. Cisco, as the Flip debacle, made obvious, is not exactly a popular consumer brand, notwithstanding the barrage of television commercials it has unleashed on couch potatoes during the last several years.

One could also argue that the commoditization of a broad swathe of enterprise-networking equipment, led by Cisco competitors, also is slashing into the giant’s dominance as well as its margins. Moreover, it remains to be seen how the inexorable march of virtualization and cloud computing will redefine the networking universe and Cisco’s role as the brightest star in that firmament.

 Penny-Pinching as New Normal

Then there are macroeconomic factors. Everywhere in the developed world, IT buyers at SMBs and large enterprises alike are trying to save hard-earned money. Cisco can wave cost-of-ownership studies all it wants, but most network and technology buyers do not perceive Cisco products as money savers. Consequently, there’s a big push from buyers, as perhaps never before, for open, standards-based, interoperable solutions that are — you guessed it — cheaper to buy than the proprietary solutions of yore.

So, it all amounts to a perfect storm driving right through the heart of John Chambers’ once-peaceful neighborhood. This is true for Cisco’s entire product portfolio, not just the Cius, but I’m writing about the Cius today — not that I’m obsessed with it, you understand — so let me pull things back into tighter focus now.

 Trying to Stop the Phones from Bleeding 

With the Cius, Cisco still seems to the think that the old rules, the old market dynamics, and its old customer control still apply. I thought more about this yesterday when I received an email message from a regular reader (imagine that!) who pointed out to me that Cisco is right about one thing: The Cius isn’t a tablet.

I’ll quote directly from his message:

The Cius isn’t a tablet  — it only looks like one.  It’s a desktop and video phone.  Cisco is in this business because PCs and wireless handsets are subsuming the function of the enterprise desktop phone (thanks to Microsoft Lync, Apple iPhone, Android, etc.).  Their phone business is a multi-billion dollar per year business.  I agree — the Cius is a distraction, but they have to do *something* to protect that desktop phone revenue stream.  Tough spot.

These are perceptive comments, and they’re borne out by recent articles and analysis on Cisco’s Cius push. All of which makes me feel, even more than when I wrote my Cius post of earlier this week, that the product is doomed to, as Mike Tyson said in one of his best malapropisms, “fade into Bolivian.” 

Gambit Won’t Work

Cisco has made a lot of money selling desktop IP phones, but that gravy train, like so many others, is drawing fewer passengers at each station. The trends I mentioned above — stronger consumer-oriented offerings from competitors in smartphone and tablets, the consumerization of IT, the enterprise focus on cutting IT costs wherever possible, and a concomitant pull away from premium proprietary technologies — are threatening to eviscerate Cisco’s IP phone franchise.

Hence, the Cius. But, even as a defensive bulwark, it doesn’t work. At the end of the day, CIsco might see an IP phone replacement when it looks at the Cius through its rose-colored glasses, but customers will see it for what it is — a relatively high-priced, seven-inch tablet running a smarphone-version of Android, and tied to proprietary video, voice, and collaboration solutions. Both the Cius and the AppHQ go strongly against the tide of IT consumerization and mobile-platform heterogeneity. That’s not a tide Cisco can reverse.

With sublime brevity, my reader-correspondent said it best: Tough spot.

Limited Horizons for Cisco Cius

Cisco’s Cius Android-based tablet will be available for purchase later this month, but it’s difficult to envision how or why it would be bought by anybody other than hardcore Cisco shops that have made substantial investments in Cisco’s enterprise collaboration and telepresence technologies.

With the Cius, and much else lately, Cisco seems to be predicating its strategy and tactics on an antiquated playbook (pardon the pun). While the world moves toward cost-effective, multivendor technologies and embraces consumerization of IT, Cisco still stubbornly pushes to be a one-stop shop for network infrastructure and much else besides. What’s more, the company is completely disregarding the consumerization wave, failing to recognize that corporate IT bosses and their departments are compelled to find ways to embrace the trend to cut enterprise costs and boost productivity.

It’s Not a Tablet

To make matters worse, Cisco’s Cius runs Android 2.2, not the tablet-optimized Android 2.3. It’s as if Cisco, perhaps under the assumption that its installed base of enterprise collaboration and telepresence customers will follow its lead obediently, couldn’t even be roused to deliver a competitive product. The price, at $750 per unit, also suggests that Cisco thinks its loyal customers will pay a sticker-shock premium for anything that ships with the company logo stamped on the box.

Cisco, for its part, has persuaded some analysts to believe that, appearances to the contrary, it’s not really a tablet vendor, even though it’s about to start shipping what is unquestionably a tablet at the end of July. The Cius, you see, is just, an entry point into Cisco’s collaboration ecosystem.

Counting on the Fans

I suppose that’s as good a way as any for Cisco to attempt to avoid direct comparisons between the price and performance of the seven-inch Cius and those of competing devices, including a new crop of ten-inch Android-based tablets that are about to hit the market as well as the ubiquitous Apple iPads that C-level executives have brought into their enterprises.

Cisco is hoping to use an enterprise app store, AppHQ, and security as hooks that will keep current customers in the fold and bring new ones into its tent. However, in an era of heterogeneous mobile-device management (MDM) suites and equally heterogeneous mobile-security suites — which seem to offer cost and flexibility advantages over the proprietary Cisco alternative in the vast majority of deployment scenarios — Cisco’s Cius market adoption will be limited to the vendor’s most zealous enterprise fan base.

Before Foxconn, Huawei Had Its Own Suicides

Long before the rash of deaths at the Foxconn Technology Group’s manufacturing facilities in China, another company fought to stem a wave of suicides at its Chinese operations.

That company was Huawei Technologies, and its problem with suicidal employees was covered in the media, though not as extensively as were the unfortunate events at Foxconn, part of the Hon Hai Precision Industry Co., Ltd.

What partly accounts for the difference in degree of coverage, I think, is Foxconn’s connection to Apple. As we all know, Foxconn manufactures Apple’s iPhones and iPads as well as computing devices for a number of other vendors, including Dell. Everything Apple touches is high profile, so it’s no wonder that the Western media gravitated to the Foxonn suicides once  Apple was discovered among Foxconn’s brand-name customers.

Another factor, though, might be the intense secrecy that surrounds Huawei. It’s a privately held company, shrouded in mystery, run by CEO Ren Zhengfei, who emerged from the People Liberation Army (PLA), is a member in good standing of the Communist Party of China, and is said to retain close ties to China’s defense and intelligence elite.

Still, the suicides at Huawei are a matter of public record. They began ramping in the year 2000 and continued well into the decade, seemingly coming to an end — or something like one — by 2008. At their peak, they were bad enough that Ren Zengfei wrote the following to another member of the Communist Party:

“At Huawei, employees are continuously committing suicide or self-mutilation. There is also a worrying increase in the number of employees who are suffering from depression and anxiety. What can we do to help our employees have a more positive and open attitude towards life? I have thought about it over and over again, but I have been unable to come up with a solution.”

This is not exactly the sort of pitch a human-resources executive wants to feature in employee-recruitment campaigns. Nonetheless, it demonstrates that Ren recognized the problem and was thinking hard about whether his company’s “wolf culture” and “mattress culture” were sustainable models on which to build a business that could scale and compete successfully against the world’s leading telecommunications-equipment and data-networking companies.

A few reports. which are disputed, suggest as many as 38 Huawei employees died from their own hand or from exhaustion during the past decade. Like Foxconn, Huawei experienced horrific on-site suicides, in which an employee typically would throw himself to his death from the balcony of a campus building.

Some commentators have noted that the suicide rate at Foxconn is not inordinately higher than China’s overall suicide rate. Some have even argued that the rate of self-destruction at Foxconn is lower than China’s rate, even going so far as to make the claim that working at Foxconn reduces the risk of suicide for Chinese employees.

Numbers can be sliced and diced, and they can be interpreted in a number of ways. As always, one should verify the accuracy of the source data and carefully check for an inherent statistical bias. I don’t have time to chase that thread now.

So, putting aside that debate, I want to consider another aspect of these stories: the incidence of at-work suicides at both Foxconn and Huawei. The instances of on-site suicide are well documented at both companies.

Perhaps I’m missing something — let me know whether I am — but I don’t believe there ever was a similar outbreak of suicides at technology firms in North America. Cisco, to the best of my knowledge, hasn’t seen its employees leaping to their deaths from the outdoor patios on Tasman Drive in San Jose. I don’t think we’ve seen anything of that sort at Juniper Networks or Brocade — or even Nortel Networks, where people have had considerable reason for despondence in recent years.

Workplace suicide is a dramatic act. It sends a powerful message. The victim makes a statement in not only how he chooses to kill himself but where he chooses to do it.

Ren Zhengfei was right to rack his brain in search of a solution to the morale problem at Huawei. However, as recent events at Foxconn and at other Chinese companies demonstrate, it isn’t a company-specific problem.

As China attempts to move up the technology value chain, from low-cost manufacturing to R&D-led innovation, it will have to find ways of motivating its employees with carrots instead of sticks.

Why Microsoft Might Finally Acquire RIM

In the past, I have argued that a Microsoft acquisition of Research in Motion (RIM) was unlikely and unwise. Still, stuff happens in the space-time continuum — circumstances change, new dynamics come into play — that cause one to revisit earlier assumptions and to reconsider possible outcomes.

Such is the case for my thoughts about a union between Microsoft and RIM. I no longer view it as an unlikely scenario. Considering what has been happening in the industry, and in light of the daunting challenges Microsoft and RIM face in the mobile marketplace, a marriage of convenience, if not one of amorous intent, could be in the cards.

Let’s first consider Microsoft’s circumstances. The company has failed utterly and repeatedly in its bid to establish a dominant mobile platform. Its smartphone licensees are defecting in droves, running into the welcoming arms of Google’s Android proselytizers.

Microsoft’s share of the smartphone operating-system market is plummeting like sales of The Knack’s follow-up albums. Microsoft’s latest silver bullet in this market is called Windows Phone 7, but a technical preview of that software, now undergoing lab testing at wireless operators, suggests Microsoft hasn’t cracked the code. A consensus is building that Windows Phone 7 is several years too late and several hundred-hundred million dollars short of where it needs to be.

At the same time, Microsoft might be coming to the grim realization that it isn’t the consumer-electronics behemoth it sees when it looks into the Redmond funhouse mirror. Microsoft’s perception of itself, as a company that actually understands and intuitively anticipates the desires of consumers, has been unmasked as abject delusion.

Fortunately, Microsoft might be gradually coming around to reality, recognizing that it must play to its strengths, not to its weaknesses. Its strengths are in enterprise markets, from SMBs upward. That  has been increasingly obvious to many people, except to certain denizens of Microsoft’s boardroom and to a few habitues of its executive suites.

Regrettably, though, Microsoft’s mobile offerings for the enterprise, even in terms of integration with its own server-based products, are sorely lacking in nearly every respect. Microsoft has failed at mobile, and it has disregarded one of its key constituencies in the process.

Meanwhile, we have RIM. Despite not having quite the corporate breadth of, let’s say, Nokia, RIM has the benefit of market focus and an established enterprise franchise that won’t vanish overnight. RIM could remain independent and stay the course. It could retain a solid core of its enterprise customer base — especially in certain vertical markets that require the centralized control, compliance, security, and back-end integration that BlackBerry products and technologies provide — but it will see some market-share erosion at the hands of Google’s Android and even Apple’s iPhone.  If RIM had more resources at its disposal, it might be able mitigate that erosion, if not stop it.

RIM might not want to entertain a union with Microsoft — scuttlebutt suggests it has resisted Microsoft’s entreaties before — but it might be more amenable to considering a compelling proposal now. Watching what’s happening to Nokia — a death of a thousand cuts amid a river of piranha, after losing its strategic bearings in a predatory jungle — cannot be edifying viewing for the chieftains at RIM. At one time, Nokia had acquisitive interest in RIM, and now Nokia is fighting, apparently without success, to remain relevant.

To be sure, RIM would not accept just any Microsoft offer. Maybe now, though, it  would not slam the door on the right offer. What might that be, though, and would Microsoft be willing to entertain it?

With more than $37 billion (and counting) in cash reserves, Microsoft has the means at tis disposal to pull off a RIM purchase involving a combination of cash and stock. RIM now has a market capitalization of $29.58 billion. Microsoft would have to pay a premium of at least 30 percent, probably more, to complete a deal. A $40-billion offer, with the right inducements, might suffice.

Clearly, that’s a lot of coin. We’re not talking about a simple, low-cost tuck-in acquisition with a modest risk profile. This would be a big deal, larger than any acquisition Microsoft has done. Until now, Microsoft’s biggest deal involved aQuantive, an online-marketing concern it bought for more than $6 billion in 2007. If Microsoft were to buy RIM, it would involve a transaction orders of magnitude greater than its purchase of aQuantive.

Indeed, the acquisition of RIM would be a scary proposition for the potentates in Redmond. It would be an off-the-scale move, a sharp deviation from Microsoft’s past practices and strategic playbook. But, as the saying goes, desperate times call for desperate measures. Microsoft, I believe, is very desperate. It could immediately realize revenue and profitability from RIM’s product portfolio and business model, which are more lucrative by far than anything Microsoft could offer in the mobile realm. Synergies with complementary Microsoft products and services also ought to be taken into account.

Critics might scoff, perhaps justifiably, citing two factors that argue against a deal (aside from the prohibitive price tag, which we’ve already discussed). First, they would point to technology-integration issues, arguing that Microsoft would struggle to convert RIM’s BlackBerry platform to Windows.

My response: Who says that needs to happen? RIM already integrates well with Microsoft applications and back-end systems. and Microsoft has been rewriting its mobile operating systems, practically from scratch, recently. It’s starting all over again with Windows Phone 7, which is receiving mixed reviews.

What risk would Microsoft incur by replacing Windows Phone 7, which doesn’t have an installed base, with RIM’s BlackBerry OS? I don’t see powerful arguments against the move. The cost of the transaction is a bigger impediment.
But, one might argue, what about Microsoft’s hardware licensees? What would Microsoft do about them?

Perhaps you’ve noticed, but Microsoft is losing their formerly loyal patronage. HP has bought Palm, and will begin using webOS in its mobile devices, while HTC, Motorola, and scores of others increasingly are adopting Google’s Android as their smartphone operating system. I don’t see many smartphone vendors anxiously awaiting the release of Windows Phone 7. They’ve moved on, and Microsoft knows it. What’s more, Google is giving away Android to licensees, making it all the more difficult for Microsoft to sell its smartphone operating system to handset manufacturers. Google changed the business dynamics of the OS-licensing game.

More than at any time I can recall, Microsoft is considering the merits of an integrated platform, one that involves a tight fusing of device hardware, operating-system software, uniform user experience (including a sleek, universal browser), a focused developer program, and a unified means of delivering and monetizing applications and content.

I am not saying Microsoft will buy RIM. The price alone is enough to dissuade it from doing so, and there are valid concerns about corporate integration and assimilation, about being able to get everybody moving in the same direction, about precluding needless and distracting internecine warfare and turf battles. There are good reasons, in fact, not to do such a deal, only a few of which I’ve touched on here.

But there’s desperation in Redmond. It’s palpable. Microsoft views mobile success as absolutely integral to its continued growth and prosperity. But Microsoft is no longer confident of its golden touch, especially in mobile computing, and it is more inclined to look beyond its doors for answers. RIM already has the sort of business Microsoft would like to own, with the potential for further synergies stemming from integration with Microsoft’s enterprise product portfolio and its cloud-computing strategy.

Consequently, I must revise my earlier opinion. I can no longer dismiss the possibility of Microsoft acquiring RIM.