October 08, 2010, 4:05 PM — Over at the investment site Seeking Alpha, Mark Riddix makes a compelling case for Microsoft to buy BlackBerry maker Research in Motion, Ltd.
Microsoft can try and try but the company has no shot at being a major player in the consumer end of the smartphone market on its own. Apple (AAPL) and Google (GOOG) already dominate this market and have millions of loyal customers that love their apps and operating platforms.
No doubt. And it's not likely even Microsoft believes the unveiling of Windows Phone 7 next month will alter its status as a smartphone also-ran. Microsoft's lack of competitiveness in the mobile market is one of the main reasons why its stock was downgraded last week by Goldman Sachs.
If share price is the bottom line -- and it is -- then Microsoft needs to do something dramatic. Claiming 8 percent of the smartphone market over the holidays with Windows Phone 7 won't cut it. Neither would buying Adobe Systems, an idea broached Thursday in a New York Times article about an alleged double-secret meeting between Microsoft CEO Steve Ballmer and Adobe chief executive Shantanu Narayen. That dramatic rumor sent Adobe shares (NASDAQ: ADBE) up nearly 12 percent in Thursday's trading. Meanwhile, Microsoft (NASDAQ: MSFT) gained all of 10 cents. See what I mean?
But buying RIM and the BlackBerry franchise suddenly makes Microsoft a major smartphone player, though one with challenges. It's highly unlikely that Microsoft can steal iPhone users, so it's really battling for the non-Apple smartphone market. And that market is rapidly becoming dominated by Android. Still, despite the growing popularity of Android among smartphone business users, BlackBerry remains the top choice in the professional consumer demographic. For now.
RIM is a $26 billion company doing battle against Apple, a company worth 10 times that amount. Now it's being outflanked and overrun by Android. Joining forces with a company (Microsoft) that's almost as big as Apple could make sense.