Shares of Research in Motion (RIMM) are up 77 cents, or 6%, at $13.29, and were up 11% earlier, following a report last night by Reuters’s Nadia Damouni that the company had been the target of takeover efforts, however slight, this summer by Amazon.com (AMZN), and others, though RIM spurned those offers, preferring to focus on their own turn-around efforts.
A piece in this morning’s Wall Street Journal by Will Connors, Joann Lublin, and Anupreeta Das extends that idea with remarks about Nokia (NOK) and Microsoft (MSFT) having in “recent months” considered buying RIMM.
Both pieces are anonymously sourced.
In response to that, in part, ThinkEquity’s Mark McKechnie this morning raised his rating on the shares to Buy from Hold, writing that the current price undervalue’s the company’s $5 billion worth of patents, $3 in cash per share, and its BlackBerry messaging service.
The stock could go as high as the mid-$20s based on the takeout talk in the articles, writes McKechnie:
If the reports are true that AMZN considered an offer, we note the stock ranged from $42.50 to a Summer low of $21.60 on August 8th. Thus we believe AMZN was likely thinking of much higher levels than the current $12.50 close. We suspect a potential bid of at least $25 or $13B which would represent an 15.7% premium from the Summer low. Other bidders were also mentioned in the press, which does not surprise us given the heated patent wars amongst the battling OS players of AAPL, Android and MSFT, and also the handset players such as Samsung and HTC.
McKechnie had already laid out much of his valuation argument last week, while warning at the time it was not yet opportune to jump into the stock.
A slightly different take is offered by Nomura’s Stuart Jeffrey, who maintains a Neutral rating on RIM shares.
In Jeffrey’s view, the company is actually unwilling to take the opportunity of a buyout:
The fact that several parties have expressed an interest in discussing a merger or take-over of RIM is encouraging for RIM shareholders. However, the board�s apparent reluctance to develop this interest suggests that the company is determined to go it alone.�RIM�s financials have missed the expectations management had this summer. A further deterioration might force management into proper discussions, but management may feel that the company�s solid cash position buys them some more time.So while we are encouraged by the news that there are interested strategic bidders for RIM, this news also seems to reinforce our view that management is unwilling to do a deal in the immediate future.
Likewise, R.W. Baird’s William Power this morning suggests thorny issues arise considering the prospect of M&A activity around RIM.
Power finds the notion that Nokia and Microsoft might have pursued a joint bid raises “immediate complications,” namely “blending RIM’s OS with Microsoft’s WP7 would be messy at�best,” and how would Microsoft be as a hardware vendor, he wonders.
Power can imagine a stand-alone bid from Microsoft, though he still thinks that clashes with the focus on Windows Phone. As for Amazon, he writes, “Though also possible, a RIM bid would seem to run counter to its current Android strategy, and would saddle it with a declining technology.”
Power thinks it more likely a hardware vendor such as Hewlett-Packard (HPQ) would take a look.
Power maintains an Underperform rating and a $13 price target on RIMM.
Note that RIM got another upgrade today, from Jefferies & Co.’s Peter Misek, to Hold.
Related:
RIMM: Morgan Keegan Sees Continued Deterioration in �12, December 21st, 2011.
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