Amazon-RIM: Summer Reunion?

Think back to last December, just before the holidays. You might recall a Reuters report, quoting “people with knowledge of the situation,” claiming that Research in Motion (RIM) rejected takeover propositions from Amazon.com and others.

The report wasn’t clear on whether the informal discussions resulted in any talk of price between Amazon and RIM, but apparently no formal offer was made. RIM, then still under the stewardship of former co-CEOs Jim Balsillie and Mike Lazaridis, reportedly preferred to remain independent and to address its challenges alone.

I Know What You Discussed Last Summer

Since then, a lot has happened. When the Reuters report was published — on December 20, 2011 — RIM’s market value had plunged 77 percent during the previous year, sitting then at about $6.8 billion. Today, RIM’s market capitalization is $3.7 billion. What’s more, the company now has Thorsten Heins as its CEO, not Balsillie and Lazardis, who were adamantly opposed to selling the company. We also have seen recent reports that IBM approached RIM regarding a potential acquisition of the Waterloo, Ontario-based company’s enterprise business, and rumors have surfaced that RIM might sell its handset business to Amazon or Facebook.

Meanwhile, RIM’s prospects for long-term success aren’t any brighter than they were last winter, and activist shareholders, not interested in a protracted turnaround effort, continue to lobby for a sale of the company.

As for Amazon, it is said to be on the cusp of entering the smartphone market, presumably using a forked version of Android, which is what it runs on the Kindle tablet.  From the vantage point of the boardroom at Amazon, that might not be a sustainable long-term plan. Google is looking more like an Amazon competitor, and the future trajectory of Android is clouded by Google’s strategic considerations and by legal imbroglios relating to patents. Those presumably were among the reasons Amazon approached RIM last December.

Uneasy Bedfellows

It’s no secret that Amazon and Google are uneasy Android bedfellows. As Eric Jackson wrote just after the Reuters story hit the wires:

Amazon has never been a big supporter of Google’s Android OS for its Kindle. And Google’s never been keen on promoting Amazon as part of the Android ecosystem. It seems that both companies know this is just a matter of time before each leaves the other.

Yes, there’s some question as to how much value inheres in RIM’s patents. Estimates on their worth are all over the map. Nevertheless, RIM’s QNX mobile-operating system could look compelling to Amazon. With QNX and with RIM’s patents, Amazon would have something more than a contingency plan against any strategic machinations by Google or any potential litigiousness by Apple (or others).  The foregoing case, of course, rests on the assumption that QNX, rechristened BlackBerry 10, is as far along as RIM claims. It also rests on the assumption that Amazon wants a mobile platform all its own.

It was last summer when Amazon reportedly made its informal approach to RIM. It would not be surprising to learn that a reprise of discussions occurred this summer. RIM might be more disposed to consider a formal offer this time around.

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Google Move Could Cause Collateral Damage for RIM

In a move that demonstrates Google’s willingness to embrace mobile-device heterogeneity in the larger context of a strategic mandate, Google today announced that it would bring improved mobile-device management (MDM) functionality to its Google Apps business customers.

No Extra Charge

On the Official Google Enterprise Blog, Hong Zhang, a Google software engineer, wrote:

“Starting today, comprehensive mobile device management is available at no extra charge to Google Apps for Business, Government and Education users. Organizations large and small can manage Android, iOS and Windows Mobile devices right from the Google Apps control panel, with no special hardware or software to manage.

In addition to our existing mobile management capabilities, IT administrators can now see a holistic overview of all mobile devices that are syncing with Google Apps, and revoke access to individual devices as needed.

Organizations can also now define mobile policies such as password requirements and roaming sync preferences on a granular basis by user group.

Also available today, administrators have the ability to gain insights into mobile productivity within their organizations, complete with trends and analytics.”

Gradual Enhancements

Google gradually has enhanced its MDM functionality for Google Apps. In the summer of 2010, the company announced several basic MDM controls for Google Apps, and today’s announcement adds to those capabilities.

Addressing the bring-your-own device (BYOD) phenomenon and the larger theme of consumerization of IT amid proliferating enterprise mobility, Google appears to be getting into the heterogeneous (not just Android) MDM space as a means of retaining current Google Apps business subscribers and attracting new ones.

Means Rather Than End

At least for now, Google is offering its MDM services at no charge to Google Apps business subscribers. That suggests Google sees MDM as a means of providing support for Google Apps rather than as a lucrative market in its own right. Google isn’t trying to crush standalone MDM vendors. Instead, its goal seems to be to preclude Microsoft, and perhaps even Apple, from making mobile inroads against Google Apps.

Of course, many VC-funded MDM vendors do see a lucrative market in what they do, and they might be concerned about Google’s encroachment on their turf. Officially, they’ll doubtless contend that Google is offering a limited range of MDM functionality exclusively on its Google Apps platform. They might also point out that Google, at least for now, isn’t offering support for RIM BlackBerry devices. On those counts, strictly speaking, they’d be right.

Nonetheless, many Google Apps subscribers might feel that the MDM services Google provides, even without further enhancements, are good enough for their purposes. If that happens, it will cut into the revenue and profitability of standalone MDM vendors.

Not Worrying About RIM

Those vendors will still have an MDM market beyond the Google Apps universe in which to play, but one wonders whether Microsoft, in defense of its expansive Office and Office 365 territory, might follow Google’s lead. Apple, which derives so much of its revenue from its iOS-based devices and comparatively little from Internet advertising or personal-productivity applications, would seem less inclined to embrace heterogeneous mobile-device management.

Finally, there’s the question of RIM. As mentioned above, Google has not indicated MDM support for RIM’s BlackBerry devices, whether of the legacy variety or the forthcoming BBX vintage. Larry Dignan at ZDNet thinks Google has jolted RIM’s MDM aspirations, but I think that’s an incidental rather than desired outcome. The sad fact is, I don’t think Google spends many cycles worrying about RIM.

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.

Cisco and RIM: Hard Times, Different Situations

A morbid debate has ensued as to whether Cisco or RIM is in worse shape. It’s an unseemly discourse, but it seems obvious to me that Cisco, regardless of its current woes, remains in a better, stronger position than RIM, both today and well into the future.

That said, let me be absolutely clear that I believe Cisco has entered a period of decline, perhaps of the irrevocable sort. The broad industry trends — commoditized wiring-closet switches, stiff competition in the data center and the network core, the rise of cloud computing, and so forth — are not its friends. To make matters worse, Cisco is suffering from its own imperial overstretch, and from a cultural malaise that afflicts and challenges all big corporations that reach a certain stage of maturity.

Not the Same

This Cisco, the one you see today, is not the one that ruled the networking industry late in the last century and early in this one. That beast, which seemed so unstoppable on its path to dominance — capturing and keeping customers, charming partners,  drawing prospective suppliers, and dazzling industry analysts — seems to have left the building. It has the same head, figuratively and literally, but it’s uncoordinated now and tends to get in its own way at least as often as it bulldozes the competition.

Even so, Cisco is a long way from dead. It has a prodigious installed base of customers, some major partnerships that still matter, and a chance to step back, reflect on what’s happening in the market, and alter course accordingly. It won’t be easy — some believe Cisco’s leadership is better at building than fixing  — but Cisco need not slide into an industry abyss.

RIM, too, has an opportunity for renewal, but its situation is far more daunting. As with Cisco, the trends — an app-driven market dynamic; consumerization of IT and “bring your own device” (BYOD) to work; the strength of Apple at the high end of the smartphone market, Google Android nearly everywhere else, and low-cost competitors in the developing world; the rise of mobile-device-management (MDM) suites that can support heterogeneous mobile platforms — are not in its favor. Also like Cisco, RIM has lost its way, failing to recognize foreboding trends and lethal competitors until serious damage had been done.

Bigger Challenges, Fewer Resources

Still, RIM is worse off in many respects. First, it’s no longer an industry leader. It’s been usurped by Google’s Android and by Apple in smartphones, and there’s a danger that Microsoft, and perhaps even HP, could knock it further down the charts. Cisco, notwithstanding its current hardships, doesn’t have that problem; it’s still number one in enterprise networking (switching and routing), though competitors are chipping away at its market share and it has lost ground in other important, faster-growing markets, such as the application delivery controller (ADC) space, where F5 leads.

Furthermore, Cisco still has customers that will buy into the brand and the higher prices that accompany it. That could change — nearly everything can change — but Cisco retains that benefit today. There might fewer of those customers than there were a couple years ago, but the population of Ciscotown remains considerable. Unfortunately for RIM, the brand-equity die has been cast, and it has suffered a decline not only in the eyes of consumers but in many enterprises as well. Apple iPhones and iPads are proliferating in enterprise settings and vertical markets, often supplanting BlackBerry devices, at a rate few predicted.

RIM also has fewer resources than Cisco. True, it’s fighting competitive battles on fewer fronts than the networking giant, but Cisco has the option of reining in its aspirations and allocating its ample resources with greater strategic focus. RIM can only do so much.

Mitigate Risk or Roll Dice?

It’s ironic that, just a short time ago, some analysts and pundits were suggesting that Cisco buy RIM. My point is not to mock them — this industry will humble anybody who tries to predict its course — but to illustrate just how much a combination of strategic missteps and the vagaries of fate can change the game in relatively short order.

The best anybody out there can do is to find a balance between risk mitigation and success probability, which often (but not always) are closely interrelated. Sometimes, though, you need to take a big risk to qualify for a big reward.

Cisco can still play some risk-mitigation cards, while RIM needs to roll the dice.

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.

Rumor Mongers of Summer

It’s like being in a hall of mirrors this evening. But instead of being filled with mirrors, this hall echoes with furtive whispers about potential acquisitions involving networking-industry notables.

Some of these rumors are unadulterated disinformation, propagated for one reason or another by vested interests (of which, I can assure you, I am not one).

In fact, before I continue, allow me to make full disclosure (as opposed to full monty, which is another thing entirely) and issue an important disclaimer: I have no financial interest or investment position in any of the companies or rumors I am about to discuss. If you should be foolhardy enough to trade on uncorroborated information presented in this blog post, you should seek psychiatric and financial help forthwith.

I will tolerate a lot of nonsense around here, but I will not countenance anybody blaming me for the loss of hard-earned money on the stock market. Buyer beware — and a little paranoia probably doesn’t hurt.

Okay, with those formalities out of the way, let’s get started on the sudden wave of madness that overtook the Intertubes beginning this afternoon. The rumors have been rife, coming from all manner of cranks, dealers, freaks, and schemers. One of these rumors might even prove to be true, but don’t count on it.

At this moment, one can hear chatter of Dell interest in Brocade; of IBM interest in Juniper; of a technology integration involving F5 and Juniper that might result in something more; of HP acquiring Fortinet; of Arris talking with suitors; and of Huawei, not Nokia Siemens Networks (NSN), being the company Motorola is trying to interest in its telecommunications-equipment business.

Meanwhile, a few crazies even think Cisco is kicking RIM’s tires. In my view, Microsoft — once it shakes off the cold sweats and horrific flashbacks associated with its gruesome Kin debacle — is more likely to troop to Waterloo with checkbook in hand.

It’s the middle of summer, but the industry natives are restless for hot-and-heavy investment-banker action. The investment bankers are ready to put on a show, too. The question is, will vendors pull the trigger on a deal or deals?

We can only wait, watch, and listen.

Microsoft Hasn’t Earned Benefit of Doubt in Smartphones

At PC World, Tony Bradley strongly counsels his readers to wait and see Windows Phones 7 before they adopt Apple’s latest iteration of the iPhone or Android-based smartphones. He also says it might be prudent to include RIM and its BlackBerry in their assessments, too, but he dismisses that thought by brushing off the BlackBerry as “not really in the same league as the next-generation iPhone and Android devices, or what it seems Microsoft will bring to the table based on what we know so far.”

It is a curious statement that practically begs for a challenge. I will oblige.

First, let’s consider Bradley’s generous optimism toward Microsoft. How many kicks at the mobile can has Microsoft had? And how many times has its foot made solid contact with said can?

Even the most indulgent of observers would have to say Microsoft’s aim has been anything but true. What, then, persuades Bradley to believe Microsoft will do the deed this time? Is it because the company’s mobile group, like a faltering restaurant whose best chefs have decamped, is under new management?

I don’t know whether that’s enough to persuade me. Microsoft has had many chances to get it right with mobile operating systems and smartphones, and I’m at the point now where it must prove that it has the chops to play the game. Until then, I’m a resolute skeptic, and I wouldn’t defer an enterprise buying decision just because Microsoft might deliver a new smartphone operating system later this year. It’s been a long time since Microsoft had the intimidating force to suspend a market in that manner.

Let’s also consider Bradley’s summary dismissal of RIM. Earlier in this commentary, he cites smartphone market numbers, derived from comScore data, that suggest RIM tops the charts in market share. The company actually gained share in the last quarter on record, according to the comScore figures.

Like Microsoft, RIM will release a refreshed smartphone operating system later this year. Unlike Microsoft, RIM has enjoyed considerable market success with its smartphones. Like Microsoft, RIM has more affinity with enterprise users than with consumers. Unlike Microsoft, RIM has given its enterprise customers and service providers mobile-enterprise technologies and handsets that actually integrated smoothly with messaging and application infrastructure. That’s all the more impressive when one considers that, in most instances, RIM’s customers also were Microsoft customers. Even with that leverage, Microsoft failed to capitalize.

I don’t understand how anybody could extol Microsoft as a mobile-enterprise savant while dismissing RIM as a court jester. I fail to see the logic that says, of the two vendors, Microsoft is more likely than RIM to deliver an elegant, seamless mobile-enterprise solutions. How does one reach that conclusion based on what we’ve seen historically? Microsoft’s track record isn’t good, and we shouldn’t give it the benefit of the doubt just because it’s gearing up for another run.

Agreed, RIM’s Blackberry Operating System has fallen behind advances brought to market by Apple, Google, and even Palm, which is preparing for mastication by HP. Like Microsoft — and Nokia, for that matter — RIM will have to make up lost  technological ground on Apple and Google. But like Microsoft, RIM is making an effort to get back into the game, with its BlackBerry OS 6.0 slated for release later this year. Earlier indications suggest that it will close, if not eliminate, RIM’s innovation deficit. Nonetheless, it is not likely to change the fundamental perception of RIM as functional stalwart as opposed to trailblazing innovator.

So be it.  RIM probably doesn’t need to lead in flash and dash to maintain its enterprise clout. RIM understands the needs of enterprises — from application and systems integration all the way through to security and compliance — and it does not figure to be  easily displaced in large numbers of those accounts. Many enterprise users might try bringing their iPhones and Android-based handsets to the office, but that won’t always work, for reasons that vary depending on the specific industries and circumstances in which their employers operate.

Many years ago, when RIM began feathering its young nest among Microsoft’s installed base, I was among those who thought Microsoft might solve mobile email and repel RIM’s incursion with prejudice. Well, that never happened. Microsoft never did get its mobile house in order. Why do some of us think it will be any different this time?

Apple Vaults Past Microsoft in Market Cap, but Markets Never Sleep

There was considerable discussion last night, continuing through this morning, about Apple supplanting Microsoft as the technology company with the largest market capitalization.

The discussion is warranted. When a changing of the guard occurs at the top of the heap — even if it’s a heap built on ever-shifting market valuation  — people will notice and try to invest great meaning in the event.

At a basic and literal level, of course, it means that the market ascribes greater value to Apple than to Microsoft. In terms of mindshare and brand, Apple has been outgunning Microsoft for some time, and the market now believes that, based on where the two companies stand today, Apple is a more valuable company that Microsoft.

What you need to remember about markets, however, is that they’re dynamic. Every day, they rise and fall, twist and turn. They never stop. They aren’t like the World Cup, for example, where a tournament is played, teams are gradually eliminated and one eventually claims the title, all its own until the next World Cup in four years.

On the market, nothing is ever fully settled. There’s no time to celebrate a milestone, because any milestone achieved is arbitrary and fleeting.

So, while I think it’s interesting that Apple has surpassed Microsoft in market capitalization — and while I agree that it says much about both realities and perceptions of both companies in the recent past and in the here and now — I also realize that the market is not finished taking its snapshots and making its sometimes capricious determinations.

Today is another day, and tomorrow will be another. Considering all the ferment and volatility we’ve witnessed in the technology sphere during the last couple months, one arguably could make the case that neither Apple nor Microsoft will necessarily accrue more relative strength during the next several years.

Obviously, Microsoft’s past-performance chart, as well as its current struggles, looks worse. It’s by no means certain that Microsoft can remake itself as its core franchises — Windows and Office — are threatened by a broad-based transition to cloud computing.

Similarly, though, the snapshot the market took yesterday might have captured Apple at its peak.  Apple is under attack for its App Store policies and practices, and its ascendant iPhone is likely to meet stiffer competition in the smartphone market from Google Android-based handsets, RIM’s BlackBerry (still a force in enterprise accounts, despite what you might have heard), HP’s Palm, Nokia (though that’s less certain), and even Microsoft, which is in the process of reanimating its moribund mobile business yet again.

Let’s not forget, too, about the Chinese handset players, who are likely to be major forces in their home markets and might not be content to play the comparatively passive role of software licensees.

Clearly news of Apple usurping Microsoft as market-capitalization king was deserving of notice and commentary. We need to remember, though, that it’s only a snapshot in time, and that markets — the public markets in which stocks are traded and those in which products and services are bought and sold — never sleep.

Nortel Plays Its Last Hand as it Solicits Bids for LTE Patents

I’m trying to make sense of the latest strategic leaks form the cratered, smoking compound once known as Nortel Networks.

Dow Jones Newswires reported last week that, “according to people familiar with the matter,” Nortel has yet to decide whether it will sell its remaining patent portfolio, which includes a large number of potentially valuable LTE patents, or to license them as part of the newfangled lawyer-driven business model that is all the rage in the courtrooms of East Texas.

Here’s an excerpt from the Dow article, as published online by the Wall Street Journal:

Nortel, which is being advised by Lazard and Global IP Law Group, is divided internally over whether to sell some or all its patents or whether to retain ownership and monetize the portfolio through a licensing program, according to people familiar with the matter. “There are still people at the company that want to license (the patents),” said a person familiar with the matter, adding that the portfolio consists of about 4,000 issued patents worldwide.

The solicitation of bids is aimed at determining how much the patents might fetch in an outright sale, the person added. “If they don’t get much interest,” the company will push for a licensing strategy, the person said. Ultimately, the fate of the portfolio rests with creditors.

But there’s the key to understanding what is likely to happen. If you were a Nortel creditor — and, for all I know, some of you might actually be Nortel creditors — which option would you prefer? Would you rather sell the patent portfolio, perhaps for somewhere in the vicinity of $1 billion (a nice neighborhood, by all accounts) to somebody like Research In Motion; or would you take your chances on a licensing business that will defer your financial gratification and realize diminishing returns on assets that will depreciate over time?

All things considered, you smart folks would want to pursue the sale, presuming you can attract a sufficiently attractive bid for the patent portfolio. That’s what I suspect all this talk about going into the licensing business is intended to achieve.

Nortel’s advisors at Lazard and Global IP Law Group aren’t saddling up for their first rodeo, and they want to set the stage for a bidding war that will ensure Nortel’s creditors get full value for what remains of the once-formidable company’s remaining intellectual property. They’re already soliciting bids, employing a stringent NDA that insists upon confidentiality regarding signing of the NDA itself as well as of the talks it facilitates.

Nortel and its creditors will be hoping an attractive offer precludes the company from having to become an IP-licensing outfit.

Despite Scuttlebutt, No News on Sale of Nortel LTE Patents

Many of you dear readers have an abiding interest in the fate of Nortel’s LTE patents, which represent a treasure trove to some and a collection of depreciating assets to others. Regardless of whether you perceive Nortel’s LTE patents as a glass half full or one that’s half empty, you probably will concede that they represent the last major asset pool under insolvent Nortel’s sagging corporate roof.

So, to whom are those patents going and at what price?

Despite the expectant buzz regarding an imminent auction or other disposition, Nortel appears in no hurry to resolve the matter. A Nortel spokesperson today, replying via email, had “no idea” on when or whether an auction or sale would be announced.

I have a feeling it won’t be too long before news surfaces. Nortel’s creditors will want to realize the value the patents represent.

Palm Tries to Bluff, but It’s Too Late

In the latest rumor du jour, Lenovo is cited by Reuters as a potential acquirer of Palm. It really does seen the menu changes daily, and if you’re having trouble keeping up with the Palm-takeover speculation, feel free to join the bemused club.

Palm’s sales agents, Goldman Sachs and Frank Quatrrone’s Qatalyst Partners, have conducted themselves with all the discretion and subtlety of carnival barkers. It’s clear that their contrived, heavy-handed tactics — including a seemingly endless succession of leaks to the business press — have failed. If anything, Palm is in a worse situation today than when the investment bankers set up their medicine-show sales tent on the M&A midway.

One after another, like too-obvious suspects in a creaking murder-mystery potboiler, Palm’s rumored acquirers have removed themselves from suspicion, apparently miffed and a little mortified at having been used as plot decoys.

So now it’s down to Lenovo. Before that, companies suggested to have an acquisitive interest in Palm included Dell, Microsoft, Nokia, Google, RIM, Apple, HP, and Motorola. Then, the focus shifted to China and Taiwan, where Huawei and HTC were drafted into the action. Nobody went for the bait — not seriously enough, anyway.

I thought ZTE might be tempted to take a look, but its chairman told Reuters it was not approached by Palm or its agents. Maybe Palm and its agents that ZTE would step from the shadows and declare its interest.

Nonetheless, Palm, distressed and capsizing, is asking too high a price. The company’s advisers (investment bankers) were said to be seeking $1.2 billion for the company. It’s difficult to envision any of the dwindling prospective buyers paying anywhere near that price.

As a result of tepid buyer interest, Palm now is making sounds about staying the course as an independent entity. The company says it could get out of hardware and license its WebOS platform to handset vendors, along the lines of Google with Android and Microsoft with Windows Phone 7 Series or whatever else it decides to sell.

Palm isn’t serious, though. That move wouldn’t make much business sense, not with licensing as its exclusive business model, and not against two well-heeled players who utilize their mobile platforms as vehicles for bigger business ambitions.

Alas, Palm is bluffing when it says ti could just walk away from the M&A table. The problem is, it’s too late to bluff when all your cards are on the table, their faces fully exposed.

Microsoft’s Consumer Groundhog Day

In so many respects, Microsoft has become its worst enemy. Just consider what’s happening with its overlapping, somewhat contradictory moves with Kin and Windows Phone 7 Series (WP7S).

The two efforts overlap because they both are targeted at consumer demographics. They conflict because they’re built on different platforms. For observers, and presumably consumers, the result is cognitive dissonance, particularly as it pertains to understanding what Microsoft thinks consumers should buy.

Should Microsoft be playing to its weakness, tackling Apple and the iPhone on its own consumer-cool turf? It doesn’t seem wise, does it? Microsoft’s consumer brand isn’t exactly imposing. Very few people not employed directly or indirectly by the company could argue, with a straight face, that Microsoft has an intrinsic feel for the consumer zeitgeist.

Microsoft doesn’t suffer only from an errant appreciation of consumer sensibilities, though that problem is irrefutable. It also is afflicted by a lack of corporate self-awareness: It doesn’t know that it doesn’t know about consumers.

As Microsoft’s executives took to the stage and to the airwaves to tout Kin, I was alternately amused and appalled at how maladroit they seemed in attempting to connect with the social-networking youth market that they perceive as Kin’s sweet spot. Microsoft seemed an aging, leering, out-of-touch lothario hitting a dance club for the first time in decades, trying too hard to sell itself to an audience with which it does not have a natural affinity.

Maybe I’m wrong, and maybe the Kin will find a niche, one big enough to satisfy its corporate masters. But Microsoft’s past performance and initial portents aren’t auspicious.

Meanwhile, I wonder, as do others, about whether Microsoft’s fixation on getting back in the good graces of mobile consumers might cost it whatever patronage it retains in the mobile enterprise. That’s a market segment Microsoft ought to understand, one in which it can leverage assets and strengths many of its competitors don’t possess. But the company’s commitment has wavered, it has failed to execute too many times with diminishing returns from successive iterations of Microsoft Windows Mobile, and now the focus seems completely lost.

That can only be good news for RIM, which, like Microsoft, has a difficult time figuring out the mobile-consumer space and how the younger generation swings. Unlike Microsoft, though, RIM is disinclined to surrender a mobile bird in the hand for one in the bush.

There’s also a good chance that Google is watching intently as Microsoft’s middle-age crisis plays out. Google has enterprise ambitions that encompass mobility and smartphones, and it has a growing ecosystem that can help it exploit chinks in the Microsoft armor.

With the Kin and Windows Phone 7 Series moves, Microsoft might think it has arrested its chronic mobile decline.

But what are they thinking? I realize past performance isn’t a guarantee of future results, but what has changed at Microsoft to lead its executive team (or us) to believe that somehow this time, in this particular foray into the consumer realm, it will be different?