Market Summary

 

Earning Reports

Total Companies: (72) Stock Center View

Symbol Price EPS
Est.
Reporting
Time
WHR 3.10 06:00 am ET
PETS 0.21 08:00 am ET
STMP 0.59 4:30 pm ET
AAPL 1.31 After Mkt
BBCN 0.30 After Mkt
BRO 0.47 After Mkt
BXS 0.33 After Mkt
CALD 0.04 After Mkt
CDNS 0.24 After Mkt
CE 1.44 After Mkt
CMG 3.84 After Mkt
CYS N/A After Mkt
ELS 0.66 After Mkt
EWBC 0.60 After Mkt
FLS 1.00 After Mkt
FUBC 0.10 After Mkt
GLF 0.82 After Mkt
GSBC 0.57 After Mkt
HLX 0.50 After Mkt
HSTM 0.08 After Mkt
HXL 0.54 After Mkt
IBM 4.32 After Mkt
ICUI 0.48 After Mkt
IEX 0.84 After Mkt
ILMN 0.56 After Mkt
KALU 1.02 After Mkt
MCRI 0.24 After Mkt
MOVE 0.01 After Mkt
NRIM 0.48 After Mkt
OPLK 0.26 After Mkt
PCH 0.83 After Mkt
PKG 1.26 After Mkt
PLXT 0.08 After Mkt
RCII 0.47 After Mkt
RMBS 0.05 After Mkt
STLD 0.43 After Mkt
TXN 0.71 After Mkt
UCTT 0.15 After Mkt
WASH 0.59 After Mkt
WIBC 0.20 After Mkt
ZION 0.44 After Mkt
ZNGA -0.01 After Mkt
AKS 0.08 Before Mkt
BMRC 0.85 Before Mkt
BSRR 0.28 Before Mkt
BTU -0.66 Before Mkt
EPZM -0.55 Before Mkt
GCI 0.55 Before Mkt
GNC 0.74 Before Mkt
GPC 1.24 Before Mkt
HAL 1.10 Before Mkt
HAS 1.45 Before Mkt
LII 1.42 Before Mkt
MLI 0.45 Before Mkt
MOSY -0.12 Before Mkt
NVR 20.48 Before Mkt
PEBO 0.40 Before Mkt
SNBC -0.04 Before Mkt
VFC 1.09 Before Mkt
WERN 0.36 Before Mkt
AKBA -0.45 Unknown
ASH 1.38 Unknown
COCO 0.11 Unknown
EDMC -0.08 Unknown
FFIC 0.38 Unknown
KRO 0.21 Unknown
NWBI 0.16 Unknown
QCRH 0.50 Unknown
SBY 0.06 Unknown
SONA 0.16 Unknown
STML -0.58 Unknown
SYMC 0.43 Unknown

Convertible Preferred Stocks Highlights

Symbol Name Last Change Volume Premium/
Discount
Est.
Yield
FCH-PA FelCor Lodging Trust, $1.95 Series A Cumul Convertible Preferred Stock 25.39 0.09 (0.34%) 577,966 -0.22% Suspended
KEY-PG KeyCorp Inc., 7.750% Non-Cumulative Perp Convertible Preferred Stock, Series A 128.75 1.00 (0.78%) 17,473 6.09% 6.02%
AES-PC AES Trust III, $3.375 Trust Convertible Preferred Securities 50.54 1.29 (2.62%) 11,689 0.42% 6.68%
← California Muni Bonds - Is The Reward Worth The Risk? (Part 4) Microsoft, Intel, Cisco (MIC) - Can The Troika Grow Again? (Part 1) →

IBM - The Only Company That Should Buy Research in Motion

Posted on 2011-06-22 by Daniel Ho

RIMM BlackberryNot so long ago, Research In Motion (NASDAQ: RIMM) was a well respected company. At the time, even after iPhone debuted, I still encountered people who used the company as an example to illustrate why innovation was important. However, I was never a fan of the Blackberry, and I just didn't understand why anyone would want to personally buy a blackberry unless it was given to them by their companies. We even shorted the stock in 2008 around $100/share when the financial tsunami hit, and covered it a few months later at around $70/share. While that was a good trade, we obviously covered it too soon, as it is now trading < $30/share after it reported disappointing earnings on June 16.

Prior to the precipitous drop of RIM of 25% after its latest earnings reports, there were many bulls who touted that RIM was too cheap not to own. The reasons most cited were its market share in the enterprise market, its single digit P/E ratio, opportunity in international markets, etc. These days, many bulls are now silenced, but there are still no shortage of people who vow for RIM, again citing the same reasons as before, ignoring the faults of their previous analyses. However, while it was always a consideration, now more and more people think RIM could be a takeover target. The names thrown out as possible acquirers are Microsoft (NASDAQ: MSFT), Dell (NASDAQ: DELL), Hewlett Packard (NYSE: HPQ), HTC, Samsung, and even Google (NASDAQ: GOOG). This is actually the main reason that discourages us from shorting RIM again, but we don't think any of the aforementioned candidates makes any sense.

Let's go over the candidates and see why they should not/will not acquire RIM. First of all, RIMM, even after its steep decline in the last few years, is still a USD $15 billion company. For any company to acquire it, they will likely have to pay a pricey premium, at least > $25 billion before RIM's board will consider it, given how much RIM was trading before the latest drop in price and how low its P/E has become. This basically precludes many companies such as Dell and HTC, not to mention other aspiring smartphone makers even if they want to, because of their current financial statuses.

For Samsung, it is likely to become 'the' leader in Android based smartphone/tablets, and there is really no reason to distract itself to support another smartphone platform it does not seem to believe in. In HP's case, it just absorbed Palm Computing, and has its own plan for smartphone/tablet, and why would it go after RIM at this point? HP also has its own share of problems in its overall corporate focus, and only a market cap of $70 billion. It's not impossible, but it's very unlikely.

A VC suggested that Google buys off RIMM for its patents and spins off its hardware division. With Google pulled out of its own Nexus One phone, and gathering momentum with its Android platform while killing RIM at the same time, it's hard to imagine why Google buying RIM would be a good idea other than fortifying its patent portfolio to counter Apple. We also don't see how Google can integrate RIM with its vast corporate cultural difference. With Google now trading below $500/share, we are actually considering buying Google stocks, but we will drop the idea in a heartbeat if Google even entertains the idea of buying RIM.

When it comes to high price acquisition, everyone tries to stuff it to Microsoft because they have the money to do it. In this case, if Microsoft acquires RIM, it will instantly gain market share in the smartphone market, which is the main reason for the speculation. However, with just a fresh partnership with Nokia, any acquisition of a handset manufacturer will certainly jeopardize the partnership and makes the whole world questions, appropriately, the strategic focus of Microsoft. The acquisition will also hurt the prospect of Microsoft working with other handset manufacturers. After all, if the handset giant, Nokia, can be toyed with, why should other manufacturers trust Microsoft anymore? Although we think it's ok for Microsoft to acquire Skype even at a high premium, as a Microsoft shareholder, we certainly do not want to see Microsoft buying RIM.

The RIMM bulls got it right that RIM had a strong enterprise focus and great relationships with mobile carriers. In our opinion, the only company that can integrate RIM into its portfolio, and effectively leverage these advantages to enhance their own business will be IBM (NYSE: IBM). With a market cap of ~$200 billion, there is no problem for IBM to pay for RIM, either in stocks or a combination of cash and stocks. Being both a software and hardware company, IBM's culture should be much more compatible with RIM than any other potential acquirers. More importantly, IBM can acquire RIM for its strong bonds with enterprises, and forget about the continual competition with Apple and Google in the consumer market, a losing proposition so far. The acquisition will streamline and refocus RIM in the business world, and solidify IBM's entries in IT departments of almost all large corporations. Furthermore, by integrating RIM and providing a viable mobile platform for enterprises on both the client and server sides, IBM can potentially reclaim its leadership in enterprise communication software over Microsoft's Exchange.

Frankly, even though we see a good fit for IBM and RIM together, we don't think RIM is ready for a takeover until its stock declines further through market share erosion and earnings losses. One strategy of investing on this theory will be to write puts on RIMM, so investors can secure a lower price point of entry on its stocks. At some point of time, RIMM as an acquisition target for IBM will become too apparent to ignore, and investors will be rewarded when time comes for that.

This article originally appears on benzinga.com

← California Muni Bonds - Is The Reward Worth The Risk? (Part 4) Microsoft, Intel, Cisco (MIC) - Can The Troika Grow Again? (Part 1) →

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