December 30, 2011 | In: Technology
What Will Amazon Do with RIM?
Of course we have all heard lately that almost every company in the world has expressed interest in purchasing the flip that flopped, RIM (Research In Motion). Even a RIM Chairman confirmed this lately, by stating that RIM spurned an offer by Amazon (an overvalued company which stock, AMZN, is worth one tenth of its current value) to buy the company. Wow! Another reason for RIM investors to really love this guy (the same way investors loved Jerry Yang for refusing the $33/share Microsoft offer back in May of 2008 – FYI: Yahoo is now trading at $16.20). In any case, I wonder who’s more crazy, is it RIM, for refusing the offer, or is it Amazon, for making the offer.
Why would Amazon be crazy? You might wonder… Isn’t RIM a catch at a current market capitalization of $7.56 billion. Well, here’s what I think:
- RIM’s main flop product, the PlayBook, directly competes with Amazon’s media hailed product, the Kindle Fire (both of them are useless pieces of junk, but hey, that’s just my opinion). What’s the point of Amazon buying a company that is producing a product that doesn’t sell, and that directly competes with its best selling product. I’m sure there’s a business sense somewhere, but I just can’t see it.
RIM’s userbase in developed countries is shrinking, and this is where the real moneymaker is. No matter how the RIM executives try to make things look rosy (by claiming that they are growing overseas), RIM is definitely losing market share. Is Amazon interested in buying the company at a P/E of 3.4 thinking that it can sustain this P/E and make pure profits in about 40 months?
Regardless of whether RIM is a catch or not, Amazon doesn’t have the expertise to handle a company like RIM. RIM needs a company like Microsoft, Google, or Samsung to turn it over, and not Amazon. RIM, in my opinion, will only add huge administrative/technical overhead to whoever buys it. How will Amazon cope with that overhead is beyond me.
RIM uses a technology that is rapidly becoming obsolete. Their OS, their phones, and everything related to RIM is either obsolete or on the way to becoming obsolete. What’s the point behind buying a company with an obsolete technology.
So, why did Amazon make this offer if it clearly can’t do anything with RIM?
Obviously, this is not official. Someone at Amazon might have mentioned this to someone at RIM on a social occasion and they made a media hype out of it, just to inflate the stock price. Could it be that RIM’s executives are jumping ship and inflating the prices just to sell their RIMM shares (watch out for these insider trades)?
Nobody knows, but what I know is that RIM is a company with no future, and that RIMM, even at a P/E of 3.40 is still highly inflated. This stock should be trading at a price lower than $5. Wait till the results of the next quarter are published and see how much RIMM will be worth then.
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