Google’s US$12-billion purchase of Motorola has renewed speculation that Research In Motion is a prime takeover target, and that it may, in fact, need to partner with another smartphone player if it’s to survive at all. To some extent, the industry RIM once dominated is consolidating around it. Apple is more than capable of operating independently, but Nokia and Microsoft announced a partnership in February. Hewlett-Packard snatched up smartphone maker Palm last year. And now Google has ostensibly entered the hardware business with its purchase of Motorola, though it was largely intrigued by the company’s patents.
Bloomberg quoted Chetan Sharma, described as an independent wireless analyst, as saying the recent Google-Motorola deal leaves RIM “in no man’s land.” Tavis McCourt, an analyst with Morgan Keegan in Nashville, said: “RIM’s management needs to come to the conclusion that they need a partner and I’m not sure that’s happened yet.”
The obvious question is: Partner with whom? For years, there have been rumours that Microsoft could be interested in purchasing RIM to get a foothold in the smartphone market. But that possibility has seemed remote ever since Microsoft and Nokia started working together. It’s even less likely now. Microsoft could actually benefit from the Google-Motorola deal. Other handset manufacturers that use Google’s Android operating system, such as Samsung and HTC, must be feeling somewhat threatened by the recent acquisition as it gives Motorola products a serious edge over their own. They may explore other operating systems as a result, namely Microsoft’s Windows Phone 7. Analyst Michael Walkley, at Canaccord Genuity, wrote in a recent note that he views Windows as “potentially emerging as a strong third ecosystem.”
The list of other potential suitors is small. Back in June, Kris Thompson, an analyst at National Bank Financial, surveyed the field and deemed a takeover unlikely. Cisco, which has enough cash to complete a deal, is already involved in too many sectors for it to be a likely bidder. Others, such as Dell and Samsung, do not have the cash and would require debt or equity financing. IBM, Thompson wrote, would be able to raise the funds, but he felt that IBM entering the smartphone and tablet sector was a “long shot.”
While many are consumed in speculating about who will buy RIM, a more important question is whether RIM needs a partner in the first place. Richard Tse, an analyst with Cormark Securities, isn’t convinced that it does at this point. Furthermore, Google’s purchase of Motorola may not hurt RIM at all. “At the margin, it could be a benefit for them, as Google faces the challenges of integration,” he says. Google will pick up an additional 19,000 employees, increasing its headcount by 60%. Digesting an acquisition of that size could prove to be a distraction that may work in favour of its competitors.
It’s also clear that RIM is staking its future on QNX-powered BlackBerry smartphones, due out some time next year. Tse says the consensus view is that Android applications will eventually be able to run on the QNX platform. One of the drawbacks of RIM’s products is the lack of applications, as developers are reluctant to code for RIM’s current software. But allowing for Android apps solves the problem. “The ability to do that would minimize the need for them to do anything else,” Tse says.
The QNX platform is, in a way, RIM’s last stand. If its next round of products flops, the company will have lost whatever investor confidence it has left, and the questions of whether RIM needs a partner—and who it could be—will take on even greater urgency. Of course, by then, RIM will be in a severely weakened state.