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Why Microsoft should buy RIMM ?

Last week two very important earnings from technology companies were published - ORCL and RIMM. Both beat earnings handily. But while Oracle stock went up by 8%, RIMM has resumed its downward slide.

Despite having excellent products in fastest growing category of smart-phones, RIMM is at a point where it needs to seriously consider merger with bigger company fight against Apple and Google Android onslaught. Who would be best fit ? There are 2-3 companies which could fit the bill but here is one investment thesis which would address issues faced by both Microsoft and RIMM.

Here are the reasons why Microsoft should buy RIMM:

  1. Both these companies are focused on enterprise market 
  2. Both have common enemies - Apple and Google and both are struggling to compete against these two 
  3. Both companies have complementary products with Microsoft dominating desktop/laptop market and RIMM dominating enterprise mobile market
  4. Microsoft Windows Mobile is not a success when compared with iOS (from Apple) and Andriod (from Google)
  5. Microsoft has to enter in fastest growing market of mobile computing devices (smart-phone and ipad equivalent devices). Blackberry and upcoming Blackpad would be a great way to buy into this market. If they don't, Microsoft runs the risk of becoming irrelevant in this market - same as search market
  6. Even with 50% premium to RIMM's market price (offer at around $70), RIMM would cost about $35 Billion which is less than 2 years cashflow for Microsoft. This would be much better use of Microsoft's cash-pile than earning 1%
  7. Technology M&A has just started picking up pace. As economy recovers, this could gather momentum and it may be too late in 2011
So Steve Ballmer, if you happen to come across this blog - think about it !

/Shyam

Disclosure: I am long on RIMM

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