A lot has been written recently about RIMM’s current death spiral and the myriad of mistakes top management has made over the years, so I will not rehash those threads of conversation. In addition, many have speculated that RIMM could make a logical pickup for another handset maker (i.e. Nokia (NYSE:NOK)), computer firm (i.e.Hewlett Packard (NYSE:HPQ)) or software maker serving the mobile community (i.e. Microsoft (NASDAQ:MSFT)). However, I have an outside-the-box suggestion: Amazon (NASDAQ:AMZN) should acquire Research In Motion.
It is a radical thought, but one that could make sense for a variety of reasons.
- RIMM has over $2 in net cash per share on its balance sheet. It is also still producing significant annual operating cash flow.
- RIMM’s patents have been estimated to be worth $10 a share based on the amount Google (NASDAQ:GOOG) paid for Motorola Mobility. Although estimating patent value is an inexact science, given the amount of litigation in this space, RIMM’s patents have significant value.
- Research In Motion’s existing maintenance contracts should be worth another $5 or $6 a share according to an analyst on CNBC Friday.
Taken together, this sum of the parts analysis comes up with a higher value for RIMM than its current $13 a share price.
Why Amazon would make a logical acquirer for RIMM:
- Research In Motion’s $7B market value is a minnow compared to Amazon’s $80B plus market capitalization. In addition, Amazon could use its highly valued stock to make most of the acquisition with some cash in a cash/stock offer.
- Amazon’s has shown it understands the consumer market, which is something RIMM’s management could never be accused of. The Kindle is a prime example of this.
- Amazon has the cash resources and the long term focus to integrate RIMM. It is already is a major player in cloud computing as well. Amazon easily could spend billions to build out the thousands of applications iPhone and Droid users currently enjoy, not to mention the R&D funding RIMM needs to build the next generation of phones.
- RIMM could help Amazon break into the enterprise market. Imagine an app on the Blackberry 10 that seamlessly allows corporate customers to order office supplies directly from Amazon. Given its algorithmic prowess in predicting customer buying desires, perhaps it could even launch a mobile search engine.
- Unlike Microsoft or Google, Amazon’s acquisitions of RIMM would not cause it to upset its clients (EX, the Asian handset makers Google antagonized with its purchase of Motorola Mobility)
What Amazon should do upon acquiring RIMM:
- Immediately fire top management who has lost the confidence of investors, customers and employees.
- Rationalize its product lineup.
- Invest the necessary money to cultivate the developers to build the app community blackberry users currently lack and the next generation of smart phones.
- Start to rebuild investor confidence by communicating frequently, honestly and transparently. The period of overpromising and under delivering must end.
I anticipate this article will generate a myriad of comments (both positive and negative) and I look forward to hearing from the Seeking Alpha community.