RIM resists takeover bid despite backdoor acquisition talk rumours

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RIM Co-CEOs Lazaridis and Balsillie attend the firm's annual general meeting of shareholders in Waterloo, Ontario. Photo - Reuters

A box of Blackberry might be on sale in the supermarket near your house but the Canadian handset manufacturer of the same name is adamant on its ‘not for sale’ status. Despite mounting financial woes, the Waterloo-based company insists it will weather the storm on its own, and repel every take over move.

The first serious take over move Research In Motion seems to be resisting is from Amazon.com Inc.The online retail giant hired an investment bank this summer to review potential merger with RIM, however a formal bid has not been tendered so far, sources close to the Blackberry maker said. There is no clear indication if any informal talks had taken place. It should be noted that Amazon and RIM are not strangers to each other. Their formal relationship started last year Amazon launched a music catalogue service for some Blackberry users.

DISAPPOINTMENT

RIMs market value has plunged 77 per cent in the last 12 months to about $6.8 billion. The company’s top management has come under intense criticism from investors following disappointing quarterly reports, delayed phone launches, weak sales of the PlayBook tablet and other missteps. Its shares are plummeting thanks to last week’s low third quarter results.

RIM investors are demanding some bold actions that include a major management shake up or sale of the company. However, the owners insist selling the company is not an option. RIMs management has told interested parties they do not want to sell or break up the company for now.

“Selling the company or an economic joint venture is probably not in the cards right now,” a source told Reuters on condition of anonymity. “Until you stabilise the platform, people are going to be very nervous about spending $10 billion or more,” it added.

While RIM could strike technology licensing deals and other kinds of commercial partnerships to boost revenue, an outright sale or joint venture is not on the cards for now, Reuters quoted the anonymous source as saying.

Some potential corporate and private equity suitors are holding out for RIM’s valuation to fall further.

The board has become more skeptical about the companys management and board structure, which currently allows Jim Balsillie and Mike Lazaridis to serve both as co-CEOs and co-chairmen. It was reported by the Wall Street Journal that the two chief executive officers are willing to follow the boards recommendations, due out next week. However, it might not include anything as drastic as a management reshuffle.

ACTIVIST SHAREHOLDERS

The Wall Street Journal reported that a RIM investor, who declined to be named, said the company was now essentially on the brink.

“This story puts RIM in play, because shareholders are going to put it in play,” the US-based investor said. “It’s over. This is now a company where the activists are in charge.”

Activist shareholder Jaguar Financial Corp has also called for a sale of RIM as a whole or in separate parts, such as the handset business, the network services operation, or the patent portfolio.

WAY FORWARD

Co-Chief Executives last week acknowledged investor anger and said they would explore a wide range of operational shifts -including new licensing opportunities and ways to better exploit its proprietary network, without giving details.

Balsille assured the company is leaving no stone unturned exploring operational changes. He also said RIM is evaluating ways to leverage the companys network infrastructure. His statements lead investors and analysts to believe that the company was considering inviting carriers – or other handset makers to access its global spanning network to generate more service fees. Many analysts believe such measures would be ‘steps in the right direction’.

RIM could boost its service revenue by licensing its new OS. It is rumored that RIM executives have approached other smart phone makers, including Samsung Electronics Co. and HTC Corp. about licensing RIMs new operating system. Such a move would mimic the strategy at Google Inc., which licenses its Android operating system to handset makers.

If one looks closer at the two companies which it has approached, they will find both are Apple arch rivals. Many critics are raising eyebrows and questioning whether RIM is trying to take on Apple (which could justify the informal talks of takeover from Apple) or simply looking at the best options available.

INSIDE TALK

RIM management is trying its best to give signals that it is intent on staying but certain back door meetings have raised some questions.

Microsoft and Nokia have been in talks with RIM. This would not come as a surprise to many as RIM and Microsoft already have a partnership, which was announced earlier this year, providing a cloud service initiative that allows corporate customers to move back office infrastructure to offsite data centres. Furthermore, Microsoft also has a partnership with Nokia that enables Nokia to install Microsofts mobile phone software on its devices.

Wall Street Journal reported that people familiar with the matter said senior executives from all three companies frequently meet to discuss ways to enhance their partnerships and talk about their industry. It is unclear how extensively RIM has been involved in any takeover discussions with Microsoft and Nokia.

Even though RIM has got a truck load of problems, it still is trying to be competitive in the market. In a series of acquisitions, RIM bought Ottawa based QNX Software Systems last year in orderto compete with iPhone and Android-based smartphones. Many wonder if it wise to throw money when those same funds might help the company out of the trench.

(Written by Rizana Jahan with input from Reuters, Wall Street Journal and Bloomberg; Edited by Moign Khawaja)

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