Nokia and Research In Motion both surged following the announcement of Google’s intent to purchase Motorola Mobility. Why? It is simple, Microsoft. The feeling around Wall Street seemed to be – they have to do something. While Nokia seems the obvious choice to (most) people, Research In Motion was mentioned quite a few times. Nokia shares shot up 17.35% with an increase of $.93 up to a mind-boggling $6.29, RIM jumped 10.38% gaining $2.55 reaching $27.11. The idea of Microsoft purchasing either of these companies in response to the Motorola deal seems to have very little rational thought behind it.
Looking at each of the companies, is it possible to find a logical reason for Microsoft to purchase either of them? Are there any glaring reasons why they should not?
Nokia: Microsoft and Nokia just recently entered into an agreement for Nokia to place Windows Phone 7 on their hardware. With that deal Microsoft managed to convince Nokia to drop its Symbian operating system and it’s years of development. Instead of purchasing the company outright Microsoft was able to gain a hardware company with almost none of the headaches that actually come with owning said business. With the exception of actually owning the patents that Nokia holds – Microsoft has Cross-Licensing deals with Nokia thereby at least offering some protection from patent claims. Following the Motorola announcement today, JpMorgan Chase & Co. analysts placed the intellectual property value at as much as 5.4 billion euros ($7.7 billion). Nokia’s market cap is between $14 and $23 billion dollars (the difference is based on the 63% premium Google agreed upon with Motorola).
There are a few reasons why Microsoft might seriously consider purchasing Nokia 1) If somebody attempted to purchase Nokia. If Nokia were to be purchased by a serious threat to Microsoft, Ballmer and company could lose their Nokia partnership. 2) from blogs.wsj.com
Horace Dediu, an independent mobile analyst, and former analyst at Nokia, agreed that Nokia is seriously undervalued and therefore becomes an attractive target.“Microsoft is putting pressure on Android by suing HTC, and demanding royalty payments. It actually makes more money out of Android than it does out of Windows Phone.
“In doing so they want to ratchet up the pressure by saying if you switch to our platform you don’t have to worry about this.
“If Google with Motorola begins to defend its licensees then Microsoft has less leverage against them.”
In essence, if Google were to take a liking to patent trolling following the new “industry standard” then Microsoft could lose it’s ability to force their partners into paying their pound of flesh. This could be a devastating turn of events for Microsoft as they rebuild their company and focus.
Research In Motion: Microsoft purchasing RIM seems to be even less beneficial for Redmond. While most people, myself included, feel that RIM is currently on the fast track for a dirt nap – they do have a trump card – Enterprise features. Until very recently RIM was, for all intensive purposes, the only device maker entrusted with the security of IT departments, Fortune 500 companies, and Governments. Building upon their enterprise strengths and leveraging Blackberry Enterprise Server within Windows Phone 7 Microsoft could hold Apple back from making further inroads within the enterprise market.
The shareholders are tired of the co-CEO’s apparent inability to do anything productive within the company. Between breakdowns on the BBC
and late to the game realizations such as this:
We were already well down a development path to the next-generation BlackBerry handsets when we realized that in the US the features and performance arms race demanded that we upgrade the chipset and port BlackBerry to a higher-performance platform. This was an engineering change that affected hardware and software timelines and pushed out entry into carrier certification labs.
A takeover bid may be just what shareholders have been praying for. With absolutely no intention of leaving their positions the co-CEO’s are likely living on borrowed time.
What are the cons for Microsoft in this deal? Quite simply, a dying brand stalled on the train tracks with a train quickly closing in. QNX devices are due out in Q1 2012 (provided internal testing goes well) according to our good friends at BGR. If Microsoft were to purchase RIM they would most likely have to maintain both their Windows Phone 7 devices with their partners AND the Blackberry OS. Otherwise Windows Phone will no longer be the only platform “equal opportunity for all partners,” Andy Lees (Windows Phone Chief).
While it is very unlikely that Microsoft will take the plunge and purchase one of these companies keep in mind that GigaOm yesterday reported that Ballmer and Co had been courting Motorola as well. If that is true then either company could definitely be the next target for acquisition.
Sound off in the comments below, please let us know if you think either one of these companies might be scooped up by Redmond.