RIM Advances on Reports It May Have Been Acquisition Target

By Douglas MacMillan and Danielle Kucera - Dec 21, 2011 6:35 PM GMT+0700

Research In Motion Ltd. (RIM) surged as much as 12.6 percent in German trading after reports said Microsoft Corp. (MSFT) and Nokia Oyj (NOK1V) mulled a joint bid, while Amazon.com Inc. (AMZN) considered buying the maker of the BlackBerry smartphone.

RIM “turned down takeover overtures” from Amazon because it wanted to fix its shortcomings independently, Reuters reported yesterday. That was followed by a Wall Street Journal article that said Microsoft and Nokia “flirted with the idea of making a joint bid” in recent months. Both cited unidentified people familiar with the matter.

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 in an informal manner 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 (RIMM) 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.

RIM shares rose as high as the equivalent of $14.21 in German trading today. Yesterday, RIM advanced as much as 11 percent to $13.85 in late U.S. trading after closing at $12.52 in New York. Amazon.com and Microsoft were little changed in Frankfurt today. Nokia increased as much as 4.2 percent to 3.80 euros in Helsinki.

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.

‘Takeover Noise’

“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, but didn’t make a formal offer, Reuters said.

Microsoft and Nokia might be able to use RIM in their rivalry with Apple Inc. (AAPL), 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.”

To contact the reporters on this story: Douglas Macmillan in New York at dmacmillan3@bloomberg.net; Danielle Kucera in San Francisco at dkucera6@bloomberg.net

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