RIM Could Be Bought on the Cheap

By Josh Long

The enormous loss in Research in Motions market value is good news for potential acquirers.

Bloomberg earlier this week calculated that an acquirer could pay a 50 percent premium and still purchase the BlackBerry maker for a lower multiple than any company in the industry.

Shares of RIM sell at 4.7 times its estimated earnings next year, which is less than any communications equipment provider, according to data that Bloomberg compiled taking into account RIMs closing stock price on Monday ($25.89). In its most recent quarter ending May 28, RIM reported net income of $695 million or $1.33 per share diluted, on revenues of $4.9 billion.

Given how significant the deterioration of the stock price has been, that alone will cause interest,” Paul Taylor of BMO Harris Private Banking told Bloomberg. RIM still has meaningful market share in the U.S. and meaningful market share internationally, and RIM has an iconic brand.”

But that iconic brand, which shipped about 13.2 million BlackBerry handheld devices in the most recent quarter, has been marred in the face of challenges that persist to date.

The slowdown we saw in the first quarter is continuing into Q2, and delays in new product introductions into the very late part of August is leading to a lower than expected outlook in the second quarter,” RIM Co-CEO Jim Balsillie revealed last week during a conference call with analysts.

Shares of RIM were trading this afternoon at $29.35 on the NASDAQ roughly one-fifth of their opening price three years ago ($146.48). The company last week announced plans to buy up to 5 percent of its outstanding common shares.

Most financial analysts who research the company arent recommending that investors buy or sell the stock at the moment. Of 51 analysts tracking the BlackBerry maker, 28 recommend a hold,” according to Zachs Investment Research. Another nine analysts recommend a sell” while three analysts rate the stock underperform.” Only nine analysts recommend a strong buy” on the stock while two advise a buy,” according to Zachs.

Following last weeks earnings, RIMs stock price plummeted then rebounded somewhat on news of job cuts and widespread speculation over a potential takeover.

Research in Motion currently has a market value of $15.37 billion, constituting just a fraction of its competitor Apple ($300.73 billion). Market value is calculated by using the current market price per share of the security multiplied by the number of shares outstanding.