Critiquing RIM Takeover Rumors

As Research In Motion’s share price gradually slides, rumors have begun to percolate about the company becoming an acquisition target.

In a piece over at the Deal.com, Microsoft and HP are mentioned as potential RIM acquirers, but I’m not seeing it.

An acquisition of RIM would be difficult for Microsoft to integrate, technologically and organizationally. RIM is a big company, with most of its leadership and engineering in Ontario, several time zones and thousands of miles removed from Redmond. Big, cross-continent mergers invariably are problematic — remember HP-Apollo and SynOptics-Wellfleet, anyone? — and their degree of difficulty and risk is commensurate with the size of the deal.

Another major complication is Windows Mobile. The problem there is that Microsoft still entertains aspirations of licensing its mobile operating system to as any handset OEM willing to adopt it.

For Microsoft to get to the point at which it would consider acquiring RIM, it first would have to conclude that it had no future as a licensee of Windows Mobile to third-party handset vendors. That day might be coming, but it hasn’t arrived yet. Microsoft just isn’t prepared to cede the third-party handset market to Google’s Android, though it increasingly appears that Microsoft’s search nemesis also will eat its lunch in the smartphone space.

In the case of HP, RIM would be an awfully big meal for Mark Hurd and his executive team to digest. Even presuming that HP might have the interest — and I’m not sure that it does — the size of the deal seems prohibitive, especially considering HP’s other priorities. Among those other priorities are core data-center switching, security software, and virtualization technologies. As HP looks to wrap its arms around the converged data center, its plate is decidedly full.

Once upon a time, I thought Nokia might take a serious run at RIM, but that window of opportunity slammed shut a few years back. Perhaps it’s better than Nokia didn’t acquire RIM. It isn’t as if Nokia has excelled at M&A, even when the deals have been relatively small.

Cisco is the only other player that has plausible means, motive, and opportunity to acquire RIM. If Cisco is serious about pursuing the video-communications and -collaboration market, it might consider how it can transform its Flip mobile video camera into a video-centric smartphone. It could pull off that technical metamorphosis without RIM, of course, but RIM would give it added credibility with enterprise IT buyers and wireless operators. But Cisco would be paying a high price for those benefits, and I don’t think it would be inclined to make the move.

Besides, Cisco has never acquired a company with a market valuation north of $30 billion. As the battle for the hearts and minds of shareholders at Tandberg demonstrates, Cisco now struggles with deals a fraction of that size. If Cisco decides to enter the smartphone space, it probably will do so without RIM as a corporate adjunct.

In summary, then, RIM’s shares might be sliding, but they’d have to slump a lot more before the company would be considered realistic acquisition prey.

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