Saturday, October 11, 2008

Redmond Not Likely To Buy Blackberry

It was a slow week last week considering that a lot of did happen. So, yesterday, Reuters believed Microsoft may be eyeing RIM in an buyout.

Could that actually happen?  Well, not in this climate.  It is not as if Windows Mobile is pulling a Palm or anything like that.  There is still a lot of demand for Windows Mobile handsets despite all the attention it's competitors, iPhone and Storm, have been getting in the media and blogs.

For the fun of it, let's say this does happen.  How would Microsoft and RIM benefit from this?

Microsoft would immediately gain millions of corporate customers and leverage in pushing its mobile agenda even as it continues to push Windows Mobile 6 and continue work on version 7.  We are not clear about its plans for Danger and how Zune will work with Windows Mobile.

Still, it gives Microsoft the ability to provide two lines products.  Blackberries for enterprise users and Windows Mobile with more consumer friendly features for consumers.  Blackberries will likely gain some specific technologies from Windows Mobile like its new browser and media player.  On the other than, Windows Mobile users may benefit from RIM's experience with e-mail and push technologies.  Also, Microsoft locks up millions of users to use its web and search platform.

However, this is not going to be cheap.  With RIM's stock having fallen about 67% from its high earlier, it is worth $31 billion, give a take a few hundred millions.  This is still an expensive deal to put together.  While everyone is talking about a $50 a share buyout and Friday's closing price of roughly $55, RIM would have to drop another $15-$20 a share before Microsoft would contemplate a deal at $50 a share.

Plus, would RIM go for it?  It's difficult to say.  It has had a rough time of late.  It has had to face two main threats, the iPhone and deteriorating economic conditions.  RIM stands to look thousands of subscribers as the finance and banking sectors continue to suffer on top of the thousands laid off in the way of bankruptcies of Wall Street investment banks.

RIM is now banking on the new products on the market to turn its fortune around.  Bold and Storm.  Bold has been on the market for a couple of months now and we have no idea how it is doing.  Storm, while officially introduced by RIM's partnerships, will not be available until November at the earliest.  That is hardly enough time for Storm to make any kind of financial impact on the quarter.

It was a slow day and we'll just have to see if this Reuters story has any merit.  Right now, we don't think it'll happen. Consider what happen with Yahoo's stock and valuation since they rejected Redmond's overture.

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