![]() ![]() What are the advantages of such a hook up to both companies? First, a much needed new lease on life second, the opportunity to enter new markets and solidify positions in existing operations third, a chance to leverage about $8.5 billion in combined cash and significant borrowing strength to push for a bigger role in adjacent markets and, lastly, the chance to fight for a future in the mutually supportive Internet and wireless markets.īut will RIM and Yahoo take such a step? I doubt it. Yahoo will therefore dominate such a venture. A merger of the two companies - some market watchers don't believe in a merger of equals, and I tend to agree. RIM's annual sales of $19.9 billion (fiscal 2011) dwarfs Yahoo's ($6.3 billion in calendar 2011), but the search engine provider has a much bigger market capitalization ($20 billion versus RIM's $9 billion), which means investors aren't that impressed with RIM's higher sales. RIM has a healthy balance sheet (about $1.5 billion in cash, short- and long-term investments) and so does Yahoo (no debts and $7 billion in cash, short and long-term investments). RIM is still a profitable company with no long-term debts. The other considerations to keep in mind are: (1) Samsung is doing very well with Android - in fact, they are taking share against fellow Android licensees HTC and Motorola (2) MSFT has effectively made its bet on its Windows Phone 7 operating system - it makes little sense to bet on another OS that is having difficulty and (3) the Canadian government may not allow an acquisition by a foreign company due to national security interests. This gives us a valuation of $5-$7 billion, meaning a stock price of $9-$13, which is a bit below where it is currently trading. Last but not least, we believe the value of its push network and BlackBerry OS are more questionable given competitive issues both have had in the marketplace but nonetheless, we assign a value of $1 billion (the price paid for PALM). For BBM with its 45 million users, we estimate it could be worth $2-$3 billion. We estimate its patent portfolio could be worth $2-$3 billion assuming the prices that an AAPL led team paid (which RIMM was part of) for Nortel assets and GOOG for MMI. We believe its most valuable assets are arguably its patent portfolio and BlackBerry Messenger (BBM) app. ![]() We see $5-$7 billion potential value, meaning $9-$13 per share. Shaw Wu of Sterne Agee was concerned that RIM's current market value (about $9 billion) poses a challenge to potential bidders, since the upside might be “limited.” In a report emailed to me on Wednesday, Shaw poured cold water on the likelihood of Samsung or Microsoft making a bid for RIM. RIM's shares are already giving up the gains on Wednesday, they dove more than 3 percent after the Samsung report.Īnalysts are not particularly gung ho about a deal for RIM. The company's stock price soared earlier this week on speculations Samsung Electronics might be interested in making an offer, a rumor that the Korean company torpedoed on Wednesday. RIM is not fielding any plausible acquisition offers, either. No other potential offers are likely for Yahoo, which, with a market capitalization of nearly $20 billion, is too large to be gobbled up by anything but the biggest tech companies in the market. If Yahoo sells its 40 percent stake in China's Alibaba and 35 percent interest in Yahoo Japan, its market value is likely to decline even further, and so will its ability to compete globally. Yahoo has no offers on the table, and it appears Microsoft is only interested in buying bits and pieces of the company. Neither company is a great acquisition target. ![]() Forecasters expect Yahoo's 2012 revenue to rise only slightly from the prior year to $4.56 billion. Sales for 2011 are estimated to be in the range of $4.4 billion, down sharply from $4.6 billion in 2010. The company's sales have been sliding with year-over-year quarterly revenue dropping in the three months ended Septemto $1.2 billion from $1.6 billion, in the year-ago quarter. Its advertising revenue base is being eroded by social media companies like Facebook, and the decline is likely to keep accelerating. ![]()
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