RIM shares jump on talk of possible sale to Samsung

The Globe and Mail

Research in Motion co-CEO Jim Balsillie (LUCAS JACKSON/REUTERS)

Research In Motion Ltd. shares were up more than 5 per cent on Tuesday as an influential technology blog reported that the Waterloo, Ont.-based maker of the BlackBerry smartphone was weighing a possible sale to South Korean giant Samsung Electronics Co. Ltd.

The Boy Genius Report blog said on Tuesday, citing “a trusted source with knowledge of the situation,” that RIM's co-CEO Jim Balsillie was pushing for a sale to Samsung, but that talks had so far led nowhere, given the large difference between what RIM executives think their company is worth and what potential suitors are willing to pay.

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Samsung, a sprawling global corporation which makes everything from clothes washers and dryers to high-end smartphones and television sets, is the latest of numerous companies rumoured to be in talks with RIM, which shed around 75 per cent of its share price over the last year and is now worth roughly $9.4-billion. Previously, Reuters has reported that Amazon.com Inc. had looked at buying RIM and sources told The Globe and Mail that Nokia Corp. and Microsoft Corp. had examined the possibility of purchasing RIM, but had given up due to the BlackBerry's rapidly declining share of the valuable United States smartphone market.

In a statement, a Samsung spokesperson denied the rumours, saying the company had neither approached RIM and that no one from RIM had approached Samsung.

“We haven’t considered acquiring the firm and are not interested in [buying RIM]” Samsung spokesman James Chung said, according to Reuters.

RIM said it does not comment on takeover speculation.

Over the past several years, RIM has had difficulty competing against the iPhone and other sleek devices running Google Inc. 's Android operating system. RIM maintains it has excellent momentum in many emerging economies, such as Indonesia and across the Middle East, Africa and in Latin America. But RIM's share of the U.S. smartphone market has slumped to around 6.5 per cent, according to research firms, even as it faces pressure in many developing markets from cheaper Android devices.

A takeover of any handset company is hugely complex and risky. Consumer preference for mobile devices is fickle, changes rapidly and tends to drop off dramatically in ways that threaten relationships with mobile software developers – and as a result the overall value of the business – as RIM has seen over the last year with third-party application developers losing interest in its platform.

But the nature of RIM’s niche in providing secure services to corporations and governments, and the rapidly changing nature of the smartphone space in general, further complicate any potential deal. RIM is also a strong example of Canadian innovation, and happens to be faltering in an era when it is unclear whether the federal government would use the Investment Canada Act to block a foreign takeover, as the government did with BHP Billiton Ltd. ’s hostile bid for Potash Corp. of Saskatchewan .

Many of RIM’s key clients, such as the U.S. government, would likely be skeptical of any deal that saw RIM folded into a company based in Asia, says Kris Thompson, an analyst with National Bank Financial. Mr. Thompson, who does not believe there is truth to rumours of a Samsung takeover, also pointed to Samsung’s astonishing device sales and the existence of its ChatON instant messaging service as further proof that the South Korean company is unlikely to be seriously interested in RIM’s handsets or software ecosystem.

“They [Samsung]have enough products to take on Apple already,” Mr. Thompson said. The one “wild card,” he added, was the value of RIM's patent portfolio, which can vary wildly, given the competitive interest in obtaining them.

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