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First, find a buyer

31 May 2012 By Robert Cyran

Research In Motion doesn’t need to remain Canadian. The struggling BlackBerry maker is weighing its options, from joint ventures to a sale. Some officials seem to prefer to keep the once-feted company’s ownership north of the U.S. border. But despite form in the recent past, the possibility of a deal being blocked shouldn’t worry potential foreign buyers of RIM too much. The company’s declining sales and significance present a bigger challenge.

True, the Canadian government torpedoed BHP’s $39 billion offer for fertilizer producer Potash Corp in 2010. And Prime Minister Stephen Harper told Reuters earlier this year that takeovers of “critical technology” companies might get the kibosh.

But Potash especially is a poor guide. Voters and politicians tend to regard natural resources as part of a nation’s patrimony. And earlier foreign takeovers of miners Inco and Falconbridge resulted in job losses, despite the purchasers’ promises to the contrary, so that may have been a factor too. Plus the company is in rude health.

RIM, on the other hand, is in decline. More than 90 percent of the company’s market value has evaporated since 2008. Sales are falling, and it is expected to post a loss in the current quarter. Delays introducing phones with a new operating system mean more customers will switch to competing iPhones and Android-powered devices. A takeover by a deep-pocketed rival willing to invest in and distribute its handsets could be RIM’s best shot at remaining relevant.

Moreover, the foreign takeover and dismantling of another failing Canadian tech firm, Nortel, went smoothly and preserved jobs. For all these reasons, it seems likely Jim Flaherty, the finance minister, was close to the mark when he recently said RIM’s shareholders were “the masters of their own destiny.”

In any case, getting a buyer interested in RIM is probably a bigger hurdle. Sure, the $5 billion firm has $2 billion in cash, and patents probably worth a similar amount. But if it can’t figure out how to make a hit handset soon, shrinking sales will bring red ink and diminish its strategic importance. The longer RIM is in decline, the less likely buyers will risk paying much of anything for what’s left of it.


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