Why Research In Motion Is an Attractive Takeover Target for Apple

Includes: AAPL, BB
by: Jonathan Liggett, CFA

Apple (NASDAQ:AAPL) has earned billions with the iPhone and the iPad. With a dauntingly large market cap of $291 billion, the stock needs a major catalyst to move higher. Research in Motion’s (RIMM) market cap is $14 billion with $2.4 billion in cash and no debt. RIMM is an attractive takeover target for Apple. It offers little risk to a behemoth like Apple and much reward. In fact, for such a small price relative to its market cap, Apple would gain access to secure corporate email, developing markets, and a huge portfolio of potentially valuable patents.

Secure Corporate Email:

Current Apple offerings lack appeal for corporate IT managers. Many IT departments have invested heavily in BlackBerries as the sole provider of mobile communication in the office. In addition, BlackBerry is well known for their highly secure email applications. The lack of robust email application is often cited as a reason IT departments are reluctant to accept iPhones for corporate IT ecosystem.

RIMM’s leadership in secure mobile email is still unsurpassed. In fact, the very reason many governments have abused RIMM asking for better access to their email system was because they could not hack it themselves. For very little money, Apple could buy the most secure mobile email product on the market to integrate with their current iOS offerings.

Developing Markets:

Outside the US, the BlackBerry instant messenger function is almost as popular as SMS in the US. With more than 39 million users (and counting), BBM is the real-time messaging app of choice for BlackBerry smartphone users around the world. Apple could buy a network of such users to integrate into their current Facetime offering. [[MSFT]] paid a lot for Skype to get access to just such an installed base. Apple could buy a similar base of developed market users without paying a huge premium to do so.

In addition, RIMM offers attractive handset price points to emerging markets. Conceivably, Apple could use these handset’s to their advantage. At first, it may be writing their own apps for the RIMM platform (i.e. iTunes, Facetime) then over time port iOS to run on RIMM hardware.


As the innovator of mobile devices, RIMM has a treasure trove of patents that could help secure Apple's position from competitors. Currently, RIMM carries $1.8 billion in acquired technology, licenses, and patents on their balance sheet according to their most recent filing. A quick search on the US Patent’s office website indicates 2842 patents since 2001 alone. These would also be helpful to Apple to protect against future litigation.

In summary, although RIMM is in a rough spot from an operational stand point, the company possesses many valuable assets that can’t be readily valued. To a large mobile competitor though, these assets are surely worth more than what the next year’s cashflow will be. The currently small market cap of RIMM makes the company ripe for a takeover from a rich competitor.

Disclosure: I am long RIMM.