Cisco-RIM Buyout Rumours Begin To Heat Up

Research notes from UBS analysts are again kicking up the idea that Cisco should buy RIM and its BlackBerry smartphone business

Cisco Systems buying BlackBerry maker Research In Motion would make sense, given Cisco’s unified communications ambitions and RIM’s smartphone capabilities, according to analysts at UBS.

Research notes from analysts Maynard Um and Phillip Huang on 20 October talking about the possibility have touched off the latest round of speculation about the future of RIM, which has been seen as an acquisition target on and off for the past couple of years.

Microsoft, Hewlett-Packard and IBM — as well as Cisco — have been talked about as potential suitors in the past. However, while noting that Cisco would make the most sense, Huang said in his research note that it isn’t anything that will happen anytime soon, unless there’s a sharp drop in the smartphone maker’s value.

“Though we see RIM facing many challenges, we see timing of [the] impact of some as overstated and believe material share devaluation from current levels makes RIM a potential M & A [merger and acquisition] target,” Huang wrote, according to The Toronto Star. “However, we see the likelihood as very low in the near-to-medium term barring share devaluation.”

BlackBerry in the enterprise

RIM has had a dominant position in the enterprise with its BlackBerry devices for years, but many analysts expect that newer phones, including Apple’s iPhone and Android-based devices from various manufacturers, will continue to erode RIM’s positions. Throw in Microsoft’s resurged push into the hyper-competitive space with Windows Phone 7, and RIM has some significant challenges.

One market research firm already sees the iPhone overtaking the BlackBerry. In a statement on 21 October, Strategic Analytics said that in the third quarter, Apple shipped 14.1 million iPhones, driving its market share to 18 percent. Meanwhile, RIM shipped 12.4 million — more than the 8.5 million in the same period last year — and saw its market share drop to 16 percent. In first was Nokia, with 34 percent.

Having RIM in the fold would help Cisco push along its UC and video efforts, according the analysts. There are strong synergies between the BlackBerry and Cisco’s Flip video camera, for example, and having a smartphone strategy in place would help Cisco as it competes with the likes of HP.

Cisco could leverage RIM’s MVS (mobile voice system), according to the UBS analysts, which enables users to seamlessly move between their BlackBerrys and corporate desk phones.

Cisco expansion

Cisco is aggressively expanding between its roots as a supplier of network routers and switches, with officials looking to leverage the company’s strength in networks to create the central platform for all communications. The BlackBerry smartphones would integrate nicely with other Cisco communications products and with its larger UC strategy, according to the analysts.

Cisco already offers IP phones, as well as devices such as its Cius business tablet PC. The BlackBerry business also would be a way for Cisco engineers to grow the Flip technology away from singe-use video cameras. Cisco officials believe video rapidly will grow into the primary form of Internet traffic, and the company plans on being the central player in that space.

Some commentators, including the folks at The Motley Fool, said it would cost a lot of money to get RIM, and questioned whether it would make sense for Cisco to spend more money to bolster “what is shaping up to be a bad initial acquisition of Flip’s parent company [Pure Digital].”

But Cisco has the money — a reported $33 billion in offshore accounts — and using that cash to buy RIM — a Canadian-based company — would not kick in any kind of tax repatriation process for Cisco, according to The Motley Fool.