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Lenovo Group (OTCPK:LNVGY) said September 3, that it will consider acquisitions to drive growth and build competence, hinting that it would acquire a smartphone maker as it expands in mobile devices. In my opinion, Lenovo and Research In Motion (RIMM) would be a perfect match.

"We would fully leverage this tool if the target is consistent with our strategy," Chief Executive Officer Yang Yuanqing said in a telephone interview with Bloomberg from Beijing. "Any area which is consistent with our strategy where we are weak, we would like to consider acquisitions."

Yang did not specify which strategic area. Yet, with the demand for PCs slowing down, developing the smartphone business is certainly Lenovo's long-term growth strategy. However, two recent events have forced all Android-based smartphone makers to scramble to rethink their strategic options.

The first one is that China's Ministry of Commerce, after more than six months of deliberation, approved Google's (GOOG) acquisition of Motorola Mobility in May, on condition that the Android operating system should be maintained free and open for five years. In other words, Google may afterwards stop providing free-of-charge new editions of Android to smartphone makers other than Motorola.

The second event is well-known now. Samsung, the top Android phone maker, lost a major infringement lawsuit against Apple (AAPL). Other Android phone makers will be equally vulnerable to potential lawsuits by Apple.

With these two specters haunting, Android smartphone makers have to think seriously about abandoning Android but they don't have many choices available: Microsoft's (MSFT) Window 8 is untested and RIM's 'never-ready' BlackBerry 10 (BB10) is still unknown and suffers a dwindling customer base (at least for the North American market.)

But RIM is still an attractive acquisition target as it is one of only three vertically integrated smartphone makers, with full experience in hardware and operation system building, as well as thousands of technical patents. The other two are of course Apple and Google-Motorola. RIM is the only one available for acquisition.

But not any phone maker can digest RIM. The buyer should have enough resources to give RIM life-supports before the latter finally launches a competitive BB10 and turns around its business.

Besides the often-mentioned Samsung, a few Chinese phone makers like Lenovo, ZTE and Huawei are logical suitors as they are big enough and enjoy the biggest home market in the world. But only Lenovo has the necessary acquisition experience, technical resources and growth potential to maximize the benefits of buying RIM.

Besides being a vertically integrated smartphone maker, RIM has a unique asset -- the enterprise-services unit that operates a network of secure servers used to support the encrypted BlackBerry Messenger. The large corporate customer base has propelled a fast growing (26.2% growth in fiscal 2012) software and services business; with margins well above 80% it now makes up 23.8% of the group revenue.

This explains why IBM was rumored last month to consider buying the unit, in an effort to enhance its service business. Hence, Lenovo, an off-shoot of IBM, also should be interested. Lenovo can merge this unit with its highly valued ThinkPad unit to jump-start its corporate service business.

Lenovo's other advantage is its successful integration of the IBM's PC operation and its business-is-business attitude in American operation (evidenced by its growing U.S. PC market share). Lenovo can convince the U.S. and Canadian governments that the BBM server network will remain independently operated and its data would not be accessible by the Chinese government.

Lenovo is also well-known for its R&D capabilities that can accelerate RIM's launch of the ever-delayed BB10 and other products.

How much is RIM really worth? According to its fiscal 2012 report, its book value was $9.95 billion, which translates to about $19 per share, much higher than the current market price of around $7.5 per share. Of course, the value of product inventory should take a big discount as the company cuts prices to sell its older BlackBerry models. Yet, it should be more than offset by the value of its patents. A Jefferies analysis valued the entire portfolio at $2.5 billion, or $4.77 per share.

But a high asset value only means that RIM deserves a big premium if it is acquired. But just how big the premium will depend on when the BB10 device is launched and how the market reacts.

Conclusion

RIM's share price has risen around 11% after Lenovo's announcement of its acquisition intention. It may be a continued consequence of the Samsung patent case. But the current price level is still far from comparable to its potential values. Investors still seem to stress on whether RIM can survive before the BB10 devices turn the tide. But with the two specters haunting, smartphone makers may have to find an alternative to Android. RIM's experience, the upcoming BB10, patents, business service assets and the dirt-cheap share price make it a good acquisition target. Lenovo, with its experience of successful acquisitions, huge home market, and especially its technical capabilities make itself an ideal partner for RIM.

Source: Research In Motion: Best Acquisition Target For Lenovo