Research in Motion Limited (RIM), famous for being the company who was the creator of the Blackberry Smartphone may make a good partner for Microsoft. RIM’s stock price has been sliced in half since June 2009 where a series of disappointing earnings calls started for the Canadian-based company.
RIM’s shareholders as well as the company itself believe that a sell-off has been overdone. The company even announced that there would be a share buyback plan for its earnings call in June.
In the area of high end phones, Apple’s iPhone and Google’s Android are the ones sustaining the market dominance. For RIM, its growth has been limited and regulated to the emerging markets. The emerging markets may be a thriving and growing market but it is also cost sensitive.
Selling high end devices in cost competitive markets leads to a declining revenue per device sold. And the Wall Street Journal doesn’t really fancy awarding high multiples to companies that are growing just because of lower prices for their products.
Since Apple and Android are in dominance, the industry is in a pressure to support these devices. RIM should change its business model such that it would goal to dominate these mobile devices. This can be done by developing software and applications for these high end phones.
As Microsoft is positioned to develop Microsoft Windows Phone 7, it will be the next generation operating system for smart phones. With RIM’s Blackberry running a next generation Win Phone 7 OS, the result is a very good synergy and back into the game future for both companies.
Another strategy that can be employed though is that Microsoft would provide an exclusive contract with RI to produce the software for its Blackberry phones without the need for a merging partnership. This option might actually be better since a buyout would be harder to negotiate.
There was also the issue of Microsoft’s failed attempt to buy out Yahoo and that issue is still quite fresh in Microsoft’s mind. Mike Lazaridis, RIM President, Co-CEO and the one who founded the company, may be as bull-headed as Yahoo and surely wouldn’t be in the mood to sell-off his baby.
Partnering with Microsoft to deliver the best operating system for phones would be a great step for RIM towards being positioned back in the market for high end phones. For this to happen, both companies should realize that their new ventures would fail without each other’s support. The newest Blackberry would fail alone as well as Win Phone 7.
The possibility of a partnership between the two companies is not really sure to be possible since talks of a possible merge has not yet been heard of but it is indeed going to be a viable partnership if ever it will commence someday. The partnership would be a truly blockbuster move for both companies. While this materializes, we could just wish that the iPhone and the Android would stop innovating for a while awaiting this anticipated development.