Analysis: Google Deal Boosts RIM’s Allure—But for How Long?

(Reuters) – Google’s $12.5 billion bid for Motorola Mobility brought a 9 percent gain for the beaten-down stock of tech rival Research In Motion on Monday as investors calculated what a similarly bulging premium would do for the BlackBerry maker’s asking price.

But it also means one more well-heeled suitor has shunned RIM as a potential target, leaving Canada’s best-known company to go it alone as other big tech players pair up.

“The challenge is increased for RIM here. They’re left without a dance partner,” said Susquehanna Financial analyst Jeff Fidacaro.

Google offered a generous 63 percent premium for Motorola Mobility as it sought to build up its patent portfolio.

A similar premium to RIM’s price on Friday would value the company at something over $20 billion.
RIM is still dominant in corporate communication, but it is struggling as employees seek to pull corporate memos onto their own devices, often an Apple iPhone or iPad or perhaps a device that uses Google’s Android technology.

There are persistent rumors of Microsoft as a possible suitor. But neither company has shown any taste for the tie-up and Microsoft recently turned toward Nokia as its preferred smartphone partner with a deal for Nokia to abandon its own software and adopt Windows Phone.

Nokia’s U.S. listed ADRs rose more than 17 percent as investors singled it out as the likely focus of any enhanced Microsoft attention now that Google has targeted Motorola.

“I think most people would guess it’s Nokia right now just because they have that existing deal…but I think RIM would be a better acquisition for Microsoft to make if it was going to make one,” said Ken Wong, a professor of business strategy at Queen’s University in Kingston, Ontario, pointing to RIM’s strengths in security and compression.

RIM’s shares have sunk almost 60 percent this year as the Canadian company missed its own limp earnings forecasts, delayed a line of more-advanced phones and failed to excite with its PlayBook tablet.

But the stock was up 10.4 percent at $27.11 on Monday, its biggest one-day rise since April 2009.
“It’s putting pressure on Microsoft and Apple and other tech companies to look at a lot of assets in that sector,” said Youssef Zohny, a portfolio manager at Van Arbor Asset Management in Vancouver, which hold RIM shares.

Sanford Bernstein analyst Pierre Ferragu suggested Google’s move to defend Android from legal attack by buying Motorola would deflate the rising price tag for tech patents. But other analysts recalibrated their valuation of RIM’s own IP holdings upward.

National Bank Financial analyst Kris Thompson said RIM’s patents alone could be worth $10 billion as he upped his rating to “sector perform” from “underperform”.

Mike Abramsky from RBC Capital Markets said the patents, centered around mobile data synchronization, could be worth up to $6 billion. But he cautioned that Google is paying top dollar to neutralize a direct threat and “it is unclear if other buyers would be equally motivated”.

Google’s bid for Motorola could also alienate other Android customers and perhaps give RIM a chance to snatch back waning market share.

(By Alastair Sharp; additional reporting by Claire Sibonney; editing by Janet Guttsman and Peter Galloway)