Google, Microsoft Could Find RIM an Enticing Purchase: Report

Google or Microsoft could acquire RIM to create a virtualized version of the BlackBerry OS on their smartphones, according to a new Canaccord Genuity report that suggests the Canadian company is for sale.

BlackBerry maker Research In Motion has insisted it will stay its course, focusing on the fourth-quarter release of new smartphones running on its new BlackBerry 10 platform. Analysts, however, doubtful that BlackBerry 10 can accomplish all that RIM needs it to, say a sale of the company is likely.

€œWe believe RIM management will need to sell the company, as we do not believe BB10 devices will turn around its struggling business,€ Canaccord Genuity analyst T. Michael Walkley said in a June 27 research note to investors.

RIM will announce the results of its fiscal 2013 first quarter June 28, at 5 p.m. EST. The analysts expect RIM to announce sales of approximately 6.9 million BlackBerry smartphones during its quarter that ended in May and for sales of 5.5 million units to follow in the August quarter.

Given his expectation that BB10 smartphones will struggle to gain traction in a market that, by the time BB10 is released, will include an iPhone 5 with Long-Term Evolution (LTE) capabilities, Walkley wrote: €œWe believe RIM may eventually sell assets, sell the entire company, or materially change its business model to a smaller niche supplier.€

RIM€™s BlackBerry Enterprise Server (BES) and Network Operations Center (NOC) architecture, and its recurring enterprise revenue stream, are its most compelling assets, accordin to Walkley. Of RIM€™s 78 million subscribers, roughly 20 million are higher average-revenue-per-user (ARPU) subscribers who could appeal to a rival ecosystem, such as Microsoft€™s Windows Phone or Google€™s Android.

€œWe believe a competing ecosystem [such as Android or Windows Phone] could run a virtualized version of BlackBerry OS on future smartphones and utilize the in-place NOC architecture in an attempt to migrate RIM€™s leading enterprise base to a competing ecosystem longer term,€ states the report.

RIM has warned that it will announce an operating loss June 28, and the analysts expect it to continue to struggle to generate a positive income, as well as to begin burning through its $2 billion cash pile.

RIM essentially introduced the world to mobile email, and its secure offering was the enterprise gold standard for a time. Its undoing has come with the introduction of the Apple iPhone, as well as Android-running smartphones, both of which have been increasingly welcome into enterprises with bring-your-own-device (BYOD) policies.

The Wall Street Journal, in a June 17 article, argues that a series of missteps on RIM€™s part also contributed to its downfall. For example, it leadership structure, which split the CEO position between Mike Lazaridis and Jim Balsillie, eventually worked against it, some sources told The Journal€”though Lazaridis and Balsillie have energetically denied this.

During a June 2011 earnings call, Balsillie said he and Lazaridis each dealt with their respective areas of expertise, and that giving up their co-CEO titles would be as meaningless as printing up new business cards.

€œThere€™s a saying, €˜Measure twice cut once,€ Lazaridis added in agreement. €œYou want to make sure that the decision you are going to make is the right one, and I think that Jim and I have that perfect balance to be able to make the really hard decision.€

The Journal article adds that, even together, the men didn€™t have quite the necessary foresight, first resisting color displays and then failing to take seriously the BYOD trend.

In January, Lazaridis and Balsillie acknowledged a need for change and turned over the position to COO Thorsten Heins, who quickly set about slimming down the company, letting employees go and killing off projects that aren€™t part of what he calls RIM€™s €œcore€ offerings. Heins is also focused on completing the task of launching BlackBerry 10.

In the Canaccord Genuity report, Walkley added that he €œstruggles to assign value€ to RIM€™s hardware business, given that he believes a company likely to buy RIM will focus on transitioning users off BlackBerry handsets and onto €œtheir own competing smartphone products or ecosystem.€

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Editor's Note: An earlier version of this article attributed the Canaccord Genuity report to analysts T. Michael Walkley and Matthew Ramsay. While the two are associates, Walkley is responsible for the report, according to the firm.