Should Microsoft Buy RIM? It May Be Time For An XPhone

Includes: BB, MSFT
by: Ritesh Betala

At first glance, my idea of Microsoft (NASDAQ:MSFT) joining the iPhone market by buying Research in Motion (RIMM) may seem preposterous, however let us dig into this a little deeper. With no growth rates or year over year earnings comparison here at this time, let us try to think this scenario not only by thinking outside the box but by smashing the box inside and out.

The Case

After playing a secondary role to Apple (NASDAQ:AAPL) in the iPod space, Microsoft could tackle Apple, Nokia (NYSE:NOK), Motorola (MOT), Samsung and Palm (PALM) head on in the iPhone world. If Microsoft were to buy Research In Motion (RIMM), it would give the former immediate access to the worldwide mobile communications market expanding its portfolio as a designer, manufacturer and marketer of wireless solutions – an area that is the core of RIM’s business model.

Apple's iPod was released in October 2001; Microsoft's Zune was release in November 2006. During the five-year lag, Apple captured nearly 80% of the market share. Microsoft could save millions of dollars in research money in trying to find the next “big” product and reduce the product cycle by couple of years. The integration of Microsoft’s products like IE, Windows Media Player, Office, and Vista into RIM’s products is promising. The Big Softee would have arrived in the consumer and corporate phone market.

The Product

With Microsoft and RIM together, the integration of Zune with BlackBerry Pearl becomes a reality. The combined product would have Phone, Email and Text Messaging, Internet, Instant Messaging, Camera and MP3 Player as well as multi-media player capabilities. Throw in a condensed version of Xbox video game console and you have a complete package perfect for todays X, Y and Z generations.

The Name

Replacing the letter “Z” from Zune with other letters from the English alphabets, the most appealing were “Tune” and “Xune”. Although, “Tune” closely rhymes with iTunes, it would be a funny name for a phone. “Xune” would be in line with “Zune”. Apple is the undisputed leader of the “I” series, with iPod, iPhone and iTv. Microsoft will try to capture the letter “X” since Xbox is already popular and name its product as “XPhone” or simply leave it as BlackBerry Pearl.

The Price

Current iPhone pricing is at $499 and $599, by the time Microsoft’s phone arrives in the market, say two years from now, Apple would have probably gone through a series of price cuts selling their phones at $399. This will compel Microsoft to target their product in the $349-$399 range.


The thinking box has been crushed.

Disclosure: Author own shares of RIMM and own mutual funds that might invest in all three companies listed.