Struggling smartphone vendor Research In Motion is still a solid takeover target according to a new report, but only at a deep discount below RIM’s already low market value. RIM has lost 75% of its value over the past year but Sterne Agee analyst Shaw Wu says RIM’s true value lies below its current market capitalization, which sits at approximately $8.7 billion. Logical buyers according to Wu include Samsung β though the company has gone on record instating it is not interested in acquiring RIM β as well as Amazon, Microsoft and maybe even Facebook. Read on for more.
“While we believe there is some intrinsic value in RIMM as an acquisition target with its 75 million subscribers, patent portfolio, BlackBerry OS, and push network, we are unsure if a price of over $10 billion makes sense,” Wu wrote in a note to investors on Wednesday. “Currently, the company has a market capitalization of $9.2 billion, meaning upside could be limited.”
Breaking down RIM’s worth to potential buyers, the analyst sees $5 billion to $7 billion in real value, or between $9 and $13 per share. “We believe its most valuable assets are arguably its patent portfolio and BlackBerry Messenger (BBM) app,” Wu wrote. “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. For BBM with its 45 million users, we estimate it could be worth $2-$3 billion.”
Wu continued, noting that RIM’s push network and BlackBerry OS likely wouldn’t have much value in a market dominated by Google and Apple. “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). 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.”
Sterne Agee reiterated its Neutral rating on RIM stock with no price target.