DealBook: BlackBerry Maker RIM Again Subject of Takeover Talk

Mark Blinch/ReutersThe new Blackberry Torch 9860.

OTTAWA — Ever since the introduction of its first BlackBerry more than a decade ago, Research in Motion has defied expectations that it would be gobbled up by a larger rival and has effectively created the market for smartphones.

But as Google moves to buy Motorola Mobility, RIM, already under pressure from diminished prospects and declining market share, is once again the subject of takeover talk.

Since the Motorola acquisition was announced on Monday, shares of RIM, which have suffered for much of the year, have shot up more than 10 percent, mainly on speculation of a sale.

“For a long while the market cap of RIM prevented any kind of takeover,” said Adam Leach, a London-based analyst with Ovum. “I’m certainly not writing them off now, but they have got a tough job.”

Tenille Kennedy, a spokeswoman for RIM, said the company does not “comment on rumors and speculation.”

The Motorola deal, which has the potential to shake up the mobile industry, comes at a difficult time for RIM.

After pioneering wireless e-mail, RIM has slowly ceded control to Apple’s iPhone and to handsets that run on Google’s Android operating system. The current lineup of BlackBerrys relies on technology that dates back to the first models of the smartphone.

RIM has moved to spruce up its technology. In 2010, the company bought QNX Software Systems of Ottawa and the Astonishing Tribe, a Swedish user interface design house, to recreate the BlackBerry platform.

But the results have been disappointing so far. The BlackBerry Playbook received a weak reception this spring when it lacked important features like an integrated e-mail application. Last week, Sprint dropped plans to offer a forthcoming model of the tablet computer that would have connected to the carrier’s network.

RIM does not seem in a rush to introduce new Blackberry phones based on the QNX software, either. The models will not be available until later next year, and the company is offering no further specifics.

Still, RIM has plenty to offer suitors. Despite reducing financial forecasts, the company remains firmly profitable. In the latest quarter, the handset manufacturer reported net income of $695 million, down from $769 million in the quarter a year ago.

BlackBerry, too, remains a valuable brand, even as its market share declines.

It is the device of choice for corporate customers in important industries like financial services and law enforcement, which depend on the unique features of the BlackBerry to safeguard their e-mail. The security stems from RIM’s proprietary global network, a system that is hard to duplicate and also generates recurring revenue for the company.

While analysts have speculated in the past that Microsoft could be interested in BlackBerry, that seems less likely in light of the Motorola acquisition, said Al Hilwa, an analyst with IDC in Seattle. If some handset makers that use Google’s Android system switch to Windows Mobile Phone 7, Microsoft’s mobile technology, then a perpetual also-ran could become a serious competitor. In that case, a deal for BlackBerry would be less necessary.

“Microsoft is the party that stands the best to gain out of this,” said Mr. Leach.

A more likely buyer, said Mr. Hilwa, would be a large software company that, like Google, sees wireless as an important component in its future growth.

Alternatively, a cash-rich Chinese handset maker like ZTE or Huawei could view RIM as a way to expand beyond generic, low-profit phones.

Another possibility, if more remote, is the prospect of a better-known Asian manufacturer such as Samsung or HTC buying RIM to distinguish its products from the Android and Windows Phone competition.

A deal for RIM, though, faces significant hurdles.

For one, RIM’s co-chief executives, Jim Balsillie and Mike Lazaridis, are the company’s largest shareholders. Neither seems interested in losing control. And they will not readily back down from a fight, as the executives demonstrated during a protracted patent battle several years ago that the company eventually lost.

The Canadian government, which must approve any takeover, has also been reluctant to sign off on deals for companies it views as strategic assets. Last year, the country’s regulators blocked the purchase of Potash Corporation of Saskatchewan by BHP Billiton, the Australian mining company. Politicians and commentators have portrayed an acquisition of RIM as an economic doomsday outcome for Canada.

But while a takeover seemed unthinkable during previous debates, the prospects for a RIM deal may be less distant in the current environment.

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