The precipitous decline this year in the market value of Research In Motion Ltd. has opened the door to a steady flow of takeover rumours.
On Wednesday, the stock jumped more than 10 per cent or $2.29, to $24.49 on the Toronto Stock Exchange after The Independent, a British newspaper, floated the idea that carrier Vodafone Group PLC is a potential aggressor and that RIM may have hired an investment bank to help it consider options.
Just last week, shares of the BlackBerry maker jumped more than 8 per cent following speculation that activist investor Carl Icahn may take a stake. Both rumours have yet to be confirmed or extinguished by the company.
Market watchers have speculated in recent months that Apple Inc., Google Inc., Microsoft Corp., or Taiwan’s HTC Corp. could be potential acquirers of RIM at a deeply discounted price. But what looks good on paper would be very hard to actually deliver.
RIM has a customer base and technology that would be attractive to companies such as Microsoft or HTC, Pierre Ferragu, senior analyst at Sanford C. Bernstein & Co., noted in a report Wednesday. But the structure of RIM’s ownership, senior management and board of directors would make a deal very difficult, he said.
“We see no likely buyer for RIM today,” Mr. Ferragu wrote, adding that the company’s co-chief executive officers – Mike Lazaridis and Jim Balsillie – would be opposed to surrendering control.
“Given the co-CEOs’ opposition to handing control to an outsider and their strong influence on the board, an activist play could face substantial delays,” he wrote.
RIM’s recent performance has disappointed investors. Its stock price has tumbled nearly 60 per cent this year while its share of the global smart phone market fell to 12 per cent in the second quarter from 19 per cent a year earlier, according to Gartner Inc. Gross margins on handsets declined 11 points in RIM’s fiscal second quarter, to 22 per cent from 33 per cent, Mr. Ferragu estimates.
The shares now trade at just four times earnings, compared with a multiple of 11.3 for Apple. That deep discount may be enticing buyers who see untapped value in the company, including the promise of a new line of “super phones” to launch next year with a more powerful operating system.
Wednesday’s stock advance came a day after Apple unveiled its latest smart phone, the iPhone 4S. It disappointed many observers who had expected an entirely new iPhone 5 device.
RIM’s management continues to express optimism about the future, but senior executives have not backed up their remarks by buying more RIM shares. Insiders have not reported purchasing shares on the open market since July of 2010, the longest dry spell in at least six years. Instead, insiders sold at least 11 times in that period, according to Bloomberg News.