Dismissing RIM/Microsoft Merger Rumors On Technical Grounds

Includes: BBRY, MSFT
by: Mark McQueen

I know that it doesn’t count as an authoritative source, but for all of the dead tree media coverage on the most recent rumour about Microsoft (NASDAQ:MSFT) acquiring Research in Motion (RIMM), none of the stories that I read touched on the technology challenges of a MSFT/RIM deal. (It is a good acquisition target by the way, see post “Takeovers to come“, April 15-07; just for HP - not MSFT.)

Lots of macro views on this idea being off-strategy (from wave-top thinkers such as Canaccord’s Peter Misek), or that the founders wouldn’t make to sell for anything less than a 50% premium, but not a word about the actual compatibility of the two firms. Fortunately, you can count on Vallywag to get to the meat of it all:

For Wall Street, it’s a juicy notion: Could Microsoft buy Research In Motion? It’s the kind of high-concept idea that gets traders afroth and keeps analysts busy churning out reports. It’s also — how to put this delicately — completely stupid. Yes, Microsoft could buy RIM — and yes, you could go out and buy a gun and shoot yourself in the face. Both are in the realm of possibility, and both are suicidal ideas.

RIM has a proprietary operating system for its BlackBerry smartphones; it also sells email server software for corporate sysadmins to install, and a “push” subscription service that links the phones and the servers together. Microsoft, meanwhile, makes a Windows Mobile operating system for phones manufactured by others, and has added BlackBerry-like “push” features to its own Exchange email software.

One can debate the technical merits of the products, but on a high level, what’s important to note is that much of what Microsoft and RIM do is duplicative and incompatible. Shelling out for a takeover premium on top of RIM’s already-lofty $47 billion market cap would get Microsoft what, exactly? A proprietary operating system for smartphones, and proprietary email software incompatible with its current product lines. On top of that, Microsoft would spend — no, waste — years rearchitecting either its current software or RIM’s to make it even vaguely functional. Oh, and some easily commoditized hardware designs.

Hardly worth the price, and by the time Microsoft made it all work, RIM’s supposedly devoted BlackBerry customers would have moved on to other phone models. Chalk this one up to late-August boredom on Wall Street’s trading desks, and the facile imaginations of business analysts who aren’t interested in the pesky details of how technology actually works.


(disclosure - I own RIM)