Tickers in this Article: RIMM, AAPL, MMI, ARMH, MSFT, DELL, HPQ
When former high-fliers come down hard, there is often a thriving trade in M&A speculations. Maybe it feeds on the hope of bruised shareholders that they'll get some of the money back, or the hopes that the shareholders in the rumored acquirers will get the chance to buy crumbled dollar bills at a big discount. Whatever the motivation, the troubles at Research In Motion (Nasdaq:RIMM) have now put this stock on the M&A hot stove.

TUTORIAL: Mergers And Acquisitions: Introduction

A Long and Fast Fall From Grace
Three years ago, RIM shares cracked $140 and the company's devices were so popular they were often referred to as "Crackberries." Then along came Apple (Nasdaq:AAPL) and its iPhone, Google's (Nasdaq:GOOG) Android platform, and a host of phones from improbable contenders like Motorola Mobility (NYSE:MMI), HTC, and Samsung, often powered by chip architecture licensed from ARM Holdings (Nasdaq:ARMH).

Since then, RIM has been losing market share like water through a sieve, mirroring the decline in Nokia (NYSE:NOK). Making matters worse, the company's line-up is aging, there aren't many exciting models in the near-term pipeline, and the company seems to be talking a little too much about its offerings for the lower-end of the market. While chip investors eagerly wait to tear apart new models from Apple or try to find hidden meanings in press releases and speeches, nobody seems to care about who Research In Motion is building into their phones - perhaps the best sign of all that investors have written off RIM. (For related reading, see How To Profit From Debt Securities In Failing Companies.)

"Can Buy" Vs. "Should Buy"
With RIM looking bloodied, investors have turned to the usual suspects in guessing about a possible bidder. Microsoft (Nasdaq:MSFT), Dell (Nasdaq:DELL), and Hewlett-Packard (NYSE:HPQ) have already popped up in the rumors, no doubt because all of them are relatively weak players in smartphones and tablets.

Microsoft could easily afford RIM, while Dell and HP could both likely raise enough money without a great deal of trouble. The question, though, is why they would want to do the deal. RIM has two large positives going for it right now - cash flow generation and lingering brand value among corporate customers. None of these supposedly likely buyers really need the cash flow and that corporate brand value is looking less and less valuable with every market share update.

Looking at it from a different angle, do any of these companies seem poised to fix what ails RIM and turn the business around? Microsoft has struggled with mobile devices for a while and neither Dell or HP really enjoy a corporate reputation for bringing cutting-edge technology to the market (apart, perhaps, from HP's printing and imaging business). While it is absolutely true that a "fix" for RIM might not really cost very much - some estimates say that Apple spent less than $200 million developing the initial iPhone - it takes a degree of risk-taking and inventiveness that these companies seem to lack. (For more on cash flow, see The Essentials Of Corporate Cash Flow.)

The Bottom Line: A Comeback Won't Come Easy
The good news/bad news of technology is that a company is only as good (or bad) as its last release. Motorola was supposedly dead and buried in the cell phone market ... until it wasn't. Likewise, companies like Nintendo, Oracle (Nasdaq:ORCL), and Corning (NYSE:GLW) have all had their stumbles and recoveries.

With $2 billion in cash, RIM is not going away tomorrow and the company has an IP estate that could yet deliver competitive devices. Few people thought that Apple or Motorola had anything special going on in mobile phones until they hit the market, and RIM could yet surprise its disappointed investors. At the same time, investors should not let their imaginations run wild with takeover speculation. RIM may indeed be worth more than its current market value and there may well be buyers out there that could accelerate a turnaround, but these rumors are common whenever a one-time winner falls from glory and the actual number of deals done is really not that large. (For more on mergers, see The Wonderful World Of Mergers.)

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