Microsoft purchase of RIM nice to consider, but unlikely

Rumors that Microsoft Corp. may purchase BlackBerry maker Research in Motion Ltd. are likely just that because of RIM's high price tag, though there would be benefits for both parties if a deal were struck, analysts said Friday.

Michelle Warren, a senior analyst for Info-Tech Research Group in Toronto, sent out a note Thursday on industry speculation that Microsoft is in discussions with RIM, observing that the deal would give Microsoft ammunition to compete in the consumer device market against Apple Inc.

It also would position them well to fight any wireless strategy from Google Inc., which has been buying up dark cable networks and is expected to make a big move in wireless communications in the next year or two, she said.

"I think this makes sense basically because Microsoft has to do something different to order increase market share in the overall IT market," Warren said in an interview Friday. "They have to do something disruptive and eye-catching, and this speaks to their marketing positioning and future expansion plans."

Microsoft has achieved a fair amount of success with its latest mobile OS, Windows Mobile 6, and has identified the mobile device space as an important one for the company's growth and revenue diversification going forward. Buying RIM would counter its current weakness in developing hardware for its mobile OS, Warren said.

RIM would gain Microsoft's brand power and also engineering expertise for one of BlackBerry's competitive differentiators. Business users find a BlackBerry's ability to communicate with Microsoft Exchange Server for mobile e-mail an attractive feature. Microsoft also makes this option available in Windows Mobile. Synching up with Microsoft would allow the company to enhance this capability faster and more efficiently, Warren said.

Neither Microsoft nor RIM would comment Friday on the possibility of a deal.

Despite the advantages of a Microsoft-RIM merger, the deal just doesn't make economic sense, other analysts said Friday. To them, it's not even a remote possibility Microsoft would pony up more than the US$47 billion in market cap RIM currently has to buy the vendor.

"I just don't see it," said Matt Rosoff, an analyst with Directions on Microsoft in Kirkland, Washington.

He acknowledged he was surprised by Microsoft's purchase of digital advertising services firm aQuantive for $6 billion, and so also could be mistaken in the case of RIM. However, it isn't likely that Microsoft, for which the aQuantive deal was its largest to date, would shell out much more than a few billion to purchase a company.

"A RIM deal would be larger by an order of magnitude," Rosoff said. "I just don't see Microsoft making that size of acquisition."

He added that some kind of strategic alliance between the two, which currently compete head to head in the mobile OS space, would be more likely. "A multiyear partnership agreement, where some money might change hands but we'd never know how much," would make more sense, Rosoff said.

Roger Kay, president of market intelligence firm Endpoint Technologies Associates Inc., agreed that Microsoft likely won't make a purchase that large. He also noted that although Microsoft has become increasingly "more comfortable" with developing consumer hardware -- with products like the Xbox 360 gaming console and Zune digital media player on the market -- there could be thorny competitive issues with mobile device makers that license Windows Mobile if Microsoft begin making hardware for this market.

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