For years, Research In Motion (RIMM) was the rising star of Wall Street. Each quarter the company delivered better than expected results, as its BlackBerry smartphone took over conventional phones, driving its stock up and even outperforming Apple (AAPL).
But, as the company failed to meet revenue expectations this past June, as a result of excess inventories and new product delays, the stock came back to Earth very quickly. As investors quickly cashed out in the five days following the earnings announcement, the stock lost 30% of its value.
Now, with RIM’s stock only 40% of its 52 week high and market cap of $16 billion the stock is relatively inexpensive and may be an acquisition target for other companies within the tech industry. But, which companies could be potential suitors for Research In Motion?
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Source: Yahoo Finance
1. Apple (AAPL)
Apple has plenty of cash sitting in the bank around $28 billion. Definitely more than enough money to acquire Research In Motion. But, what kind of value can a company like RIM offer to Apple? After all, Apple has its own iPhone brand which dominates the market. But, an area where the BlackBerry has consistently outperformed the iPhone is the professional market many people use their Blackberry as work phones. If Apple acquires RIM, it will have a virtual choke hold over both the consumer and professional smartphone markets. Still, an acquisition is unlikely and certain SEC regulatory rules may prevent Apple from taking over its competitor.
2. Google (GOOG)
With its recent takeover of Motorola Mobility (MMI), Google has proven its readiness to acquire mobile phone companies. Will Research in Motion be the next target? Perhaps not, Google already has plenty on its hands with Motorola. Until Google sees the results of its latest acquisition, I doubt whether another acquisition will be in the offing. Not to mention RIM’s BlackBerry does not use the Android OS, making Google and RIM an unlikely match.
3. Hewlett Packard (HPQ)
Perhaps RIM would have been a better acquisition than Palm for HP back in 2010. However, at that point in time, RIM's stock was trading in the stratosphere, probably too expensive for HP to afford. Now, with Hewlett Packard trying to spin off Compaq computer and Palm, while it is acquiring autonomy (AUTNF.PK), it is very unlikely that HP has the resources to buy Research In Motion.
4. Microsoft (MSFT)
Microsoft has been looking to gain momentum with its Windows Phone OS in the smartphone market, but among Apple’s iOS and Google’s Android, Microsoft seems to always be left out of the conversation. Microsoft does have the resources to acquire RIM and the desire to expand its reach in the smartphone industry. However, Microsoft has its own smartphone OS that is not very similar to RIM’s BB7 or QNX, making Microsoft an unlikely suitor for RIM.
Despite its relatively low market cap, Research in Motion is not a suitable target to major tech companies in the smart phone industry. Investors who bet on this prospect may be disappointed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.