Does RIM’s weak share price bring on a takeover bid? part 2

Lots of buzz has been generated by the original post (“Does RIM’s weak share price bring on a takeover bid?” October 8-08), and I wanted to add a few points for further grist for the mill:

– I started writing the original post at 4:17 a.m. (woke up when the neighbour’s home alarm went off) or so yesterday morning, but the post ran around 9:39 a.m. on Wednesday;

– at that point, Research In Motion (RIM:TSX, RIMM:Q) was trading around C$60;

– for the good of the Candian tech ecosystem, I don’t want the notional Microsoft/RIM M&A deal to come to pass, and made that point crystal clear in the original post;

– obviously, Jim and Mike are crucial to RIM’s success (as I said in the original post), as Duncan Stewart reminded Reuters earlier today; but despite their large share holdings they don’t own enough of the company to be able to block ahostile takeover if their institutional shareholders wanted to tender;

– naturally, MSFT would want (need?) Jim and Mike to stay with RIM going forward, but it isn’t clear if MSFT believes anyone in the world is essential to any business; Bill Gates recently stepped back from a daily executive role at MSFT, didn’t he?

– moreover, it appears to all shareholders that Jim and Mike currently work not for the money but for the joy of it. If MSFT could ensure that would continue, why would they not want to stay with RIM if it were a subsidiary of MSFT? Would they threaten to walk out the door and work on their charities? Try their hand at another start-up? Take up professional golf or tennis? Perhaps, and I can have no possible insight into what are referred to as “soft issues” in the M&A world. But does MSFT come across as a firm that would let one or two individuals stand in the way of their strategic desires?

– the NASDAQ started to rise out of the blocks yesterday, taking RIM and Apple with it, among others;

– IBM reported decent earnings and outlook yesterday, which added further fuel to the Tech bellweather fire;

– although the NASDAQ took a pasting today (down 5.5%), firms such as Apple, Google and IBM held their own (lost less than 3%). INTC, Moto and ORCL took it a bit harder;

– Inexplicably, RIM closed up 2.5% on the NASDAQ (5% on the TSX given the drop in the CDN$ today).

The fundamental point of launching an opportunistic takeover bid is that the target’s share price must provide for some opportunism. RIM was really cheap at C$60 when the first post went up (there is no relationship between the stock price and my original post btw!), but at C$68 it is a little less so. On the NASDAQ, it has rallied from US$54 to US$59.

If MSFT had to throw up a 30% premium (US$16 on US$54 quote) to get the attention of RIM’s institutional shareholders of RIM, $5 of that premium just went out the window…making the deal idea not quite as well-timed as it was just 33 hours ago.

This doesn’t mean that it still isn’t a smart move for MSFT, but it’ll be a bit less accretive to MSFT’s earnings than it would have been.

MRM
(disclosure – I own RIM)