Microsoft-RIM Tie-Up Unlikely

Analysts and financial sources are deriding market chatter about Microsoft Corp. (Nasdaq: MSFT) buying BlackBerry as hugely unlikely, despite a run-up on the Canadian email maven's shares at the end of this week.

RIM opened at $85.20 on Friday morning after climbing rapidly on Thursday on the Microsoft buyout rumors. The stock was off slightly at $85 in Friday afternoon trading.

Analysts see a Microsoft buyout of its wireless email buyout as improbable. "Stupid rumors," says Gartner Inc. analyst Ken Dulaney. "I would give it zero possibility."

"RIM's market capitalization currently hovers around $50 billion," notes AR Communications Inc. analyst Carmi Levy. "That's over 20 percent of Microsoft's own market cap. Even for a company with the cash reserves of Microsoft, RIM would be an incredibly expensive purchase."

Microsoft's Windows Mobile market share is currently around 14 percent, double that of RIM's seven percent share of the high-end smartphone market, according to AR Communications. Both trail Symbian, which commands 67 percent of the smartphone market, due to its dominance of the European market.

"Even a RIM acquisition wouldn’t give Microsoft much of a boost in its efforts to increase its mobile market competitiveness," comments Levy. "I see Microsoft acquiring other firms in smaller, more tactical transactions."

Microsoft has tended to focus on far smaller, niche players in the wireless and mobility space. For instance, Redmond has bought Euro mobile ad company ScreenTonic and Tellme, a speech applications company, this year. (See Microsoft Acquires ScreenTonic and Microsoft Buys Tellme.)

For its part, RIM has never shown any desire to be acquired despite being linked with a number of wireless rivals. "RIM's valuation is in such jewel-in-the-crown territory that realistically very few companies qualify to even consider buying the Canadian wireless pioneer," notes Levy. "Before these latest rumors, we’ve also heard that Motorola, Nokia, and even Apple might have been interested."

RIM itself won't comment on this latest round of rumor and speculation.

A financial source reckons the rumor is more smoke than fire. "It is last day of the month when people mark-up stocks and spread lots of rumors," he comments. "I doubt it is true, Microsoft is not in the device business."

— Dan Jones, Site Editor, Unstrung

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