TGAM STORY

RIM shares rise on takeover talk

ROMA LUCIW and TAVIA GRANT,  Globe and Mail Update

Shares of Research in Motion Ltd. vaulted briefly to a record in U.S. trading Thursday on speculation that the Canadian maker of the BlackBerry handheld device could be bought by Microsoft Corp.

Although the chatter was met with much skepticism, a number of wire stories and market blogs mentioned rumours that the world's largest software company was eyeing an acquisition of Waterloo, Ont.-based RIM.

Timothy Ghriskey, chief investment officer at Solaris Asset Management LLC, said the RIM-Microsoft rumour filtered its way to his desk in Bedford Hills, N.Y.

“Yes, I have heard that. But I hear lots of rumours,” he said. “I just think it is very unlikely that Microsoft would buy this company. It would be so out of character for them to do something like this.”

Although the BlackBerry e-mail device carries a great brand name, Microsoft tends to develop products in-house, he said, adding that RIM's valuation would likely scare them off. RIM's current market capitalization is $46.8-billion (U.S.) while Microsoft's is $266.5-billion.

Rob Sanderson, an analyst with American Technology Research, said that despite nearly two decades of such rumours, Microsoft did its first big deal ever this year when it acquired Seattle-based online marketing firm aQuantive Inc. for $6-billion (U.S.).

“RIM's market cap is more than $6-billion, a lot more than that. And certainly, the founders of RIM and key investors believe it is worth a lot more,” Mr. Sanderson said. “RIM has gotten so big that it would be very difficult for anyone to acquire it now. Even Microsoft.”

Although Microsoft has a massive amount of cash and cash flow, it also committed to the biggest dividend payment in technology company history and the biggest share buy back in tech industry history, he said. “They are putting a lot of their cash back into their investors. That does not suggest to me that they are putting together a war chest for big deals.”

Shares of RIM climbed 91 cents (Canadian), or 1.05 per cent, to close at $87.71 in Toronto on the market chatter. The U.S.-traded stock rose to a record high of $85 (U.S.) before falling back to close higher by $1.05 (U.S.), or 1.28 per cent, at $82.87. Microsoft stock slipped 14 cents to $28.45.

A RIM spokeswoman said in an e-mail that the company does “not comment on rumours or speculation.”

The takeover chatter also spilled into the currency market, helping send the Canadian dollar up at one point by one-third of a cent, said Steve Butler, director of foreign exchange trading at Scotia Capital.

“It's a good rumour, it sounds to me to be a bit far-fetched but hey, in this environment, it's hit a bid first and ask questions later,” he said. “I certainly think it did give Canada a bit of a lift as it made its rounds in the rumour mill.”

Currency trading is so “illiquid and jittery” right now that the people are quick to react to any speculation, he added.

The Canadian dollar closed at 94.46 cents (U.S.), up 0.16 of a cent from Wednesday.

“Microsoft has been mentioned as a possible buyer,” Frederic Ruffy, an analyst at options education firm Optionetics in California, told Reuters about the possibility of RIM getting snapped up.

“According to speculation, the software giant might be interested in RIM in response to Google's recent announcement that it is interested in making its own mobile phone operating system, which would compete with Windows Mobile,” he said.

Not everyone was hearing the rumours. Steve Massocca, head of trading at PacificGrowth Equities in San Francisco, said he has not heard anything about a union between RIM and Microsoft. “Anything is possible,” he said. “But RIM is an extremely volatile stock, the fact that it is up a couple of bucks doesn't mean anything.”