RIM Surges Most in 10 Weeks on Reports It Was Acquisition Target

Wednesday, 21 Dec 2011 10:44 AM

 

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Dec. 21 (Bloomberg) -- Research In Motion Ltd., maker of the BlackBerry smartphone, surged the most in 10 weeks in Nadsdaq trading after reports Microsoft Corp. and Nokia Oyj mulled a bid while Amazon.com Inc. also considered buying RIM.

Research in Motion ‘turned down takeover overtures’’ from Amazon because it wanted to fix shortcomings independently, Reuters reported yesterday. Then a Wall Street Journal article said Microsoft and Nokia “flirted with the idea of making a joint bid” in recent months. Both publications cited unidentified people familiar with the respective matters.

RIM had jumped at least 5 percent nine times since July before today on speculation that the company’s stumbles and cheap valuation make it a takeover target. Co-chief executive officers Jim Balsillie and Mike Lazaridis are RIM’s co-chairmen and own 11 percent of the company. Their willingness to consider an offer is critical, and they haven’t shown evidence of that to date, said Rod Hall, a JPMorgan analyst.

“It is unlikely RIM will pursue strategic action prior to launching BlackBerry 10,” said Hall, who is based in San Francisco and rates RIM “neutral.” “The company needs to focus on executing and closing a significant product gap rather than being distracted with M&A.”

RIM rose 8.8 percent to $13.62 at 9:46 a.m. in New York after earlier increasing as much as 13 percent for the biggest intraday jump since Oct. 5. Before today, the stock had dropped 78 percent this year Amazon.com fell 0.5 percent to $181.56, while Microsoft declined 0.6 percent to $25.87. Nokia increased 0.5 percent to 3.66 euros in Helsinki.

Informal Discussion

Microsoft looked at the option of making a joint bid with Nokia for RIM, according to a person with knowledge of the matter who asked not to be identified because the talks were private. The proposal, which included Nokia taking on RIM’s hardware business, was discussed informally and wasn’t taken to the board level, the person said.

Before the reports, RIM stock had tumbled to its lowest level in almost eight years. Last week, the company disclosed a delay in a new generation of BlackBerrys designed to fuel a rebound, adding to challenges that include lost market share and a tablet device that bombed with shoppers. The 78 percent plunge in RIM’s shares this year before today leaves it vulnerable to an approach from suitors, said Sameet Kanade, an analyst at Northern Securities Inc.

Shares Surge

“At this valuation, it is a strong acquisition target,” said Kanade, who is based in Toronto and rates RIM a “speculative buy.” He doesn’t own the stock.

Jamie Ernst, a spokeswoman for Waterloo, Ontario-based RIM, declined to comment, as did Mary Osako, a spokeswoman for Seattle-based Amazon, and Peter Wootton, a spokesman for Redmond, Washington-based Microsoft. Nokia doesn’t comment on rumor or speculation, said Doug Dawson, a spokesman for the Espoo, Finland-based company.

RIM trades at 2.83 times trailing 12-month earnings, the lowest of any communications-equipment maker with a market capitalization greater than $1 billion, according to data compiled by Bloomberg.

“There is only one clear beneficiary of the current takeover noise: the excessively de-rated RIM shares,” Alexander Peterc and Alexandre Faure, analysts at Exane BNP Paribas, said in a note today.

The status of discussions between Microsoft and Nokia was unclear, according to the Wall Street Journal. Amazon hired an investment bank to review a possible deal with RIM, without making a formal offer, Reuters said.

Lumia 800

Microsoft and Nokia might be able to use RIM in their rivalry with Apple Inc., the largest smartphone maker. Amazon is also vying with Apple in the tablet market.

Nokia started selling the 420-euro Lumia 800, its first device running Microsoft’s Windows Phone software, in November in Europe. Nokia Chief Executive Officer Stephen Elop teamed up with Microsoft to compete with advanced touchscreens from Apple and vendors of handsets using Google Inc.’s Android system.

Mats Nystroem, a Stockholm-based analyst at SEB Enskilda, said an acquisition of RIM would make more sense for a company such as Amazon than for Microsoft and Nokia.

“Microsoft is pushing Windows through Nokia, why would they include another operating system from RIM that is inferior and not competitive?” he said in a phone interview. “For those companies, like Amazon, needing to strengthen their intellectual property position, RIM could be part of the puzzle.”

--With assistance from Peter Burrows and Danielle Kucera in San Francisco, Jonathan Browning in London and Kati Pohjanpalo in Helsinki. Editors: Jeffrey Tannenbaum, Niamh Ring

To contact the reporter on this story: Douglas Macmillan in New York at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

© Copyright 2014 Bloomberg News. All rights reserved.

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