Examining A IBM Take Over Of RIM


IBM is the Holy Grail of technology businesses in the US and the world. Its current customer list not only boasts a large percentage of the largest companies but also works closely with small customers. IBM has a penchant for delivering technology solutions to customers, this would fit in nicely with that pattern. Clearly the idea of having a phone that can send and receive your work email, synchronize your personal information (PIM) and run web application in the same manner as a PC is the next big thing in corporate America.

RIM has been the subject to many take over rumors, Nokia, Microsft, IBM, etc. On every new rumor that starts to spread the stock runs up but usually quickly fades as the rumor prove to be false. Here are our thoughts why we would think IBM would be a good fit for RIM:

1) Allows RIM to sell to numerous IBM corporate customers.

2) Deal would be considered carrier and hardware manufacturer neutral.

3) Would boost IBM’s WebSphere product visibility.

4) Would be done at a substantially higher stock price.

5) Would indicate that RIM’s dominance in the smart phone market is
coming a quick end as competitors launch more feature rich smart phones.

6) Would allow RIM’s handset sales numbers to be removed from most
filings as they would not be material to a RIM+IBM combo.

7) Last major deal that IBM did was the Lotus buyout, it came at a huge
premium to the market price.

When the IBM-RIM rumor was spreading around, it was to be valued at $15B far too cheap, stock is around $12.8B market capitalization. So realistic the selling price is about
$19B-$20B. Of all the rumors about RIMM being acquired, this is the deal that makes
the most sense as it is both carrier and manufacturer neutral. This will allow the company to continue to roll out new phones for each specific carrier for at least a little while (this idea helps add to the number of handsets sold as people have switched carriers and need to get new blackberries that work on the new carriers network).

IBM has historically partnered with several leading technology companies in move to increase its consulting business. The examples of this would be previous alliances with EPNY and BVSN when those ideas were hot among the business community.

The number of new smart phones that are hitting the market is increasing every day, most have significantly better features than the Blackberry models (some include MP3 players, cameras and video recording capabilities). Most new smartphones already come with BB Connect, which is the email service that is powered by RIMM.

It is possible that two to three years from now, the sales of handsets by RIM will not be material to the top line. This would be caused by the expansion of other handsets that carry significant feature advantages as well as possible price advantages over the RIM models. While this should not be a huge concern today, a year from now, competition will likely make that minor concern today a real worry in the future.

Author: Brian Bolan, regular member of our Blackberry Cool Forums: http://forums.blackberrycool.com