RIM Is a Poor Buyout Target: 10 Reasons Why

By Don Reisinger  |  Posted 2013-01-29

RIM Is a Poor Buyout Target: 10 Reasons Why

It seems that every month, there's a rumor circulating suggesting that another technology company will buy out Research In Motion.

The latest claim focuses on Lenovo, which is said to be at least keeping an open line of communication with RIM, and is always considering merger-and-acquisition targets. Both Lenovo and RIM have tried to toss some ice water on the rumor, but it illustrates an important point: RIM is, at the very least, a buyout target.

However, when it came down to a decision of actually buying out RIM, it was clear the company has too many problems and faces too many challenges to be worth the potential cost. In fact, over the last couple of years, reports have suggested that Microsoft, Samsung and even IBM have at least considered the idea of acquiring RIM.

In each case, those companies slowly backed away after concluding that it wouldn't be a smart or profitable acquisition. What those companies realized was that although the company's assets and technology are attractive, RIM is carrying a lot of baggage that makes it an awful buyout target. And now, more than ever, would be a bad time to buy up the BlackBerry maker.

Read on to find out why.

1. BlackBerry's decline

RIM's BlackBerry market share is plummeting in both developed and developing countries around the world. Things are so bad, in fact, that recent reports have suggested Android and iOS combined now own 92 percent of the entire mobile operating system market. What company would want to acquire a vendor that's fighting for only 8 percent of that space?

2. There's no indication BlackBerry 10 will work

There's little debating that BlackBerry 10 will be a major step up over the operating system currently running on BlackBerry devices. However, BlackBerry 10 will not be the platform to actually take down Apple and Google and restore RIM's fortunes. The company's troubles are simply too widespread and too major for a simple operating system launch to fix.

3. The corporate culture is all wrong

RIM has been operating under a corporate culture for years that values the old, obsolete values of the early 2000s over the forward-thinking ideas that govern the mobile space today. And unfortunately, RIM's employees have signed on to those tired ideas. A company looking to transform RIM will not want to acquire it for that reason alone.

4. Only Apple can pull off the business model

There is not a single company other than Apple that has been able to combine software and hardware to achieve great success since the start of the smartphone era. Granted, RIM did that years ago in the days of feature phones, but that was before the iPhone joined the market. It would take a truly phenomenal new product to take down Apple and the iPhone. BlackBerry 10 isn't that product, nor is any such product on the horizon.

RIM Is a Poor Buyout Target: 10 Reasons Why

5. It's a value issue

Looking at RIM products, it's hard to find the level of quality and value that folks would find elsewhere in the mobile space. For example, RIM's devices have small screens, physical keyboards, and most would agree, are not as worthy of a person's hard-earned cash as an iPhone or Galaxy S III. That's a problem for RIM, and something that won't be addressed so easily by its would-be buyer.

6. The changes would be too drastic

In order to unlock RIM's true value, a buyer would need to make several changes. For one, the company would need to offload unnecessary assets and start getting serious about eliminating unnecessary divisions. RIM might also want to open its network to carriers and start leveraging its patents. The problem is, all that takes time. While the company is transitioning its operation, it's losing money in its established business. That factor alone could scuttle any acquisition deal.

7. The enterprise is losing interest

Let's face it: The enterprise is central to RIM's future success or failure. And although the BlackBerry is still the most-used mobile device in the enterprise, the BYOD craze has created a problem for RIM. In fact, for the first time ever, iOS and Android combined for more shipments to the corporate world in the fourth quarter than BlackBerrys. The enterprise is slipping away from RIM. And that scares would-be buyers.

8. Developers don't care

In order for RIM to be successful, the company will need to have developers taking its software to the next level with third-party applications. However, there's a problem: Developers aren't jumping on the BlackBerry bandwagon right now. Until they do so, acquiring RIM for its mobile software seems like a bad idea.

9. International success is waning

There was a time when many believed that international markets would save RIM. Under this scenario, the company could lose the U.S. market and still make up for it elsewhere around the world. However, a look at RIM's market share in Asia, Europe, and emerging markets in South America seem to indicate that the BlackBerry isn't performing well. International expansion could provide some value to RIM's would-be buyer. Too bad the company can't deliver.

10. It's still overpriced

As of this writing, RIM is trading at $16.13, pushing its market capitalization—a measure of its total value—to $8.3 billion. For a company that's in decline and has no answer to the iPhone, that's expensive. After all, most companies are acquired at a premium, which means a buyer could pay $10 billion or more for RIM. Getting a return on that investment might never happen.

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