Why RIM shouldn’t buy Palm (and what they should do)

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Research in MotionOk, so we know the so-called “insider information” came from a LiveJournal site. We know that the informant is so pro-Palm that it actually borders on comedy (why would RIM buy Palm so they could fire one of their own CEOs and be listed as PALM on the NASDAQ?). However, accurate rumors can come from a wide variety of sources, and this is a rumor that gets passed around quite a bit, so let’s take a look at the chances of it coming true then, shall we?

Merger rumors usually surround two types of companies: those looking to rebound from a poor stock showing and successful companies looking to expand their market. Although it can be argued that RIM could easily fit both categories, in this case, it’s more likely in response to RIM’s lagging stock price. On the surface, buying/merging with Palm seems like a fairly reasonable reaction by RIM to help bolster their stock: you get to eliminate one of your competitors, gain automatic entry into a handset market that you don’t really deal with (the “do everything” PDA) and show investors that you’re growing.

However, there are a lot of potential pitfalls to a merger of this sort. A RIM/Palm merger would most likely come off as highly reactionary (i.e. “the market’s getting saturated with competitors, Wall Street doesn’t like our stock, let’s go buy someone”) and RIM’s corporate brain trust is too smart and cool-headed to do something so impulsive. A merger like this would also dilute RIM’s focus, as they would have to deal with a rather lengthy and engaging restructuring process in trying to figure out what to do with their acquisition: do they keep the Treo design and Palm OS and just rebrand the device with BES support, do they redesign their OS and incorporate some of Palm’s features for BlackBerry, or do they work on a PalmBerry? A headache like this would only distract RIM from taking care of what they should be focused on: controlling the mobile enterprise market with rock solid, specific functionality email devices.