Friday, June 24, 2011

Ruling out each of RIM’s “potential” buyers

By Ray Nicolini


Since RIM’s dismal Q1 numbers were released, analysts have been very verbal with their idea that RIM will either go under within the year or simply be bought out – while many have agreed with this forecast, many have also strongly disagreed. Some of the potential suitors mentioned frequently in regard to this are: Microsoft, Apple, Google, Cisco Systems, HP, Dell, and IBM.

Today, Kris Thompson at National Bank Financial released his own report, listing the reasons why said companies won’t put an offer together anytime soon. Read below:
Microsoft: Despite being at the top of the list, it just bought Skype for $8.5-billion (U.S.), and has already inked a partnership with Nokia.
Apple: No reason to. It’s already branching into the enterprise market and is currently the market leader in the consumer segment.
Google: Has its Android platform, simple as that.
Cisco Systems:  Already has over 30 product segments and is currently parting ways with weak non-core units, such as its Flip video device.
HP: Has its Palm division and webOS, which most think is more than enough for HP to concentrate on right now.
Dell: Simply may not be able to pull off a deal of this size/magnitude.
IBM: Though it has the financial muscle to pull it off, Thompson views this deal as a “long shot.”
When this list is whittled down, all that’s left are private investors; which are also considered a long shot because investors rely on, “strong, stable cash flows to pay off this debt” and RIM’s market is, “fiercely competitive and probably undergoing a transition to lower gross margins.” Further, “[a]ssuming private equity invested 2 times cash flow (or earnings before interest, taxes, depreciation and amortization) and a high-yield issue could be raised at 5 times cash flow, then RIM’s sustainable annual cash flow would need to be $2.85-billion to acquire the company for $20 billion net of cash on hand,” Mr. Thompson calculated.
Yes, they did generate that kind of cash flow in 2010, but with stock prices dropping and avid users’ slowly but surely migrating over to Android/iOS, the chances of that kind of cash flow repeating itself are slim. I think RIM is basically in serious need of a re-brand, fast. They also need to take their future into their own hands and not be so reliant on running Google’s Android apps on QNX as their saving grace. There is only soo long RIM can ride the BBM train until it loses its niche relevance.
Now don’t get me wrong and please don’t take what I’m saying from a fan-boy perspective – I hold no bias; I just want to see RIM pick themselves up. They are Canada’s biggest tech success story, donate millions upon millions to charity, and create work for thousands of Canadians. I just think people are throwing in the towel way to soon. Give’em a chance, they’ll be back.

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