First, the rumor and its immediate impact. Then the reality.
According to a "trusted source" speaking to the Boy Genius Report, embattled BlackBerry maker Research in Motion is looking for a buyer, with the "front runner" being Samsung, which recently surpassed Apple to became the world's largest shipper of smartphones.
I know, another anonymous source. It gets tiresome. But investors are giving credence to the rumor, with shares of RIM (NASDAQ: RIMM) jumping by early Tuesday afternoon to as high as 17.25, or 6.7% above Monday's closing price.
However, in their eagerness to "buy on the rumor," some investors seem to have missed this other part of BGR's anonymously sourced story: That RIM's co-CEOs, Jim Balsillie and Mike Lazaridis, are risking blowing the deal by vastly overestimating the value of their company, much as Yahoo did in 2008 when it spurned Microsoft's acquisition offer of $31 a share as insultingly low. At the time Yahoo shares (NASDAQ: YHOO) were trading at 19.18. Today they're worth 15.55.
RIM currently is valued at $8.9 billion. But BGR reports:
We have heard the company is looking for more than $10 billion for a full sale, likely somewhere in the $12 billion to $15 billion range, or between approximately $22.90 and $28.60 per share.
If that's really what Lazaridis and Balsillie are looking for, they're being delusional. RIM shows no sign of being able to reverse its loss of smartphone market share, it's PlayBook tablet is a disaster, and its big comeback wonder product, BlackBerry 10, won't be available until late in the year. RIM also is dwarfed in size by its two superior competitors, Apple and Google. Where's the roadmap to victory again?
It's reasonable to conclude that RIM is worth less than its current market value. Yet these guys reportedly are playing hardball.
This isn't the first RIM buyout rumor of late. Days before Christmas, shares jumped 13% on reports that Microsoft-Nokia and Amazon.com had been in talks with the BlackBerry maker.
But those negotiations occurred last year and went nowhere. Which underscores for RIM the reality that only a small handful of companies could be considered potential acquirers. And if RIM is serious about finding a buyer, it needs to get over itself and look at where it's at today, not where it once was or someday hopes to be.
Or, like Yahoo, it can continue to go it alone in a hyper-competitive market against larger, better-positioned rivals. Ask Yahoo shareholders how that's worked out.