By Ed Oswald | Friday, October 10, 2008 at 11:50 am
Research In Motion’s stock price has taken a nosedive in recent weeks. While some of it has to do with the overall market meltdown that is occuring on Wall Street, it is also experiencing pressure related to the costs of launching new devices such as the BlackBerry Storm and Bold, which Harry just spoke of.
The stock is now down to about $53, a stunning 65 percent fall from its June high of $148. It’s precipitous drop has stirred talk on the Street of a possible buyout, with one analyst saying Microsoft could be that company.
“RIM is a massive strategic fit” for Microsoft, Canaccord Adams analyst Peter Misek told Reuters. “I’m fairly certain they have a standing offer to buy them at $50 (a share).”
If Microsoft were able to make this happen, it would be a huge win for them. Windows Mobile (while doing okay) really hasn’t made much of a real dent in the smart phone market. By snagging RIM, Redmond would gain a good deal of footing against Apple and Symbian, as well as new entrant Google.
There is some thing that still need to happen, namely at least another $10 or so drop in RIM’s stock price if this were to happen. RIM right now has a value of about $31 billion or so, a little to much for Microsoft to handle without tapping the credit markets.
With credit all but frozen right now, that’s not going to happen. However, if it is able to make a $50 per share offer, the value of the company would be placed at about $28 billion, much more affordable.
Reuters estimates that Microsoft has about $24 billion or so in cash and short-term investments that could be used to finance most of the deal. I guess the question then becomes, is it worth it depleting your cash reserves in an economic climate such as this?
I’d think you’d be able to find a lot of analysts who would argue that wouldn’t be such a smart idea.