Would Ottawa block a RIM takeover? - Market Watch Article

Would Ottawa block a RIM takeover?

Commentary: Clarity needed from Canadian government on tech bellwether

5 Comments Share Email Print By Bill Mann, MarketWatch

Research in Motion
PORT TOWNSEND, Wash. (MarketWatch) � If you want a good example of an �annus horribilius,� just talk to any Research in Motion investor. The Canadian company�s stock has been dropping like the proverbial lead balloon. And that�s prompted a lot of recent talk of a possible takeover by the likes of (choose one) Google, Microsoft, Facebook, or Amazon.

But hold the smartphone. If such a bit bid ever comes � and RIM�s RIMM +9.40% execs are insisting they�re not at all interested � what would Canada�s federal government do? Would it play goalie and block a hostile foreign takeover of the Ontario-based company, just like it did in 2010 when Saskatchewan�s huge Potash Corp. POT +2.01% was about to be swallowed by Aussie mining giant BHP Billiton BHP +2.14% ?

Norton Rose lawyer Derek Burney stated in a recent paper by the law firm, �The concern is that Canada has become protectionist and will review transactions through a political lens with a sharp domestic-preference focus, rather than an international business and investment focus.�

Wants foreign investment

Partly because of RIM � whose stock was off 75 percent last year � there�s understandably increasing pressure on the Canadian government to clarify how it�s making decisions about international investment, which it claims it wants and which it surely needs.

If the Canadian government turns protectionist � RIM is, after all, one of its biggest brand names � it could have a real chill on foreign investment in the country. (And if any country should know about chills, this formerly icy Montreal resident can attest, it�s Canada).

RIM�s stock got a slight boost last week after Fox Business reported that Goldman Sachs was exploring �strategic options� for the Canadian smartphone maker. But it also followed the news about the Ontario-based company unveiling the latest version of its BlackBerry PlayBook operating system at the annual Consumer Electronics Show in Las Vegas.

So, the ball�s now in Ottawa�s court � especially if there is a hostile takeover of the company that�s lost a big chunk of market share to Apple AAPL +1.37% and Google�s GOOG +0.64% Android in its core business. It doesn�t help that RIM�s PlayBook tablet has been such a dud and not so smart. (One Canadian daily�s cartoonist happily suggests that unused PlayBooks be marketed as a burnable alternative-energy source).

Being Canadian counts

Having lived in Canada, I can attest that Canada has been protective of its businesses and its artists. To use but one example, there�s a Canadian Content rule in place that requires 30 percent of all songs played on Canadian radio stations to be Canadian in some form. Such a rule wouldn�t fly in the U.S. (And it�s unnecessary as well).

The Investment Canada Act � which would quickly be branded as full-bore Socialist if it were ever suggested in the U.S., requires Canada�s Industry Minister to weigh in on deals that are worth more than $312-million � and ensure they provide a �net benefit� to Canada.

But the �tests� used to determine if the acquisition would be of net benefit are largely subjective, allowing domestic politics to play a role in the decision-making process. Which they did in the Potash affair � Saskatchewan�s premier waged a last-minute, full-on campaign to stop the takeover, claiming his province would lose huge tax revenues. It worked, especially when Harper realized he might also lose some Conservative Saskatchewan seats in Parliament. Sorry, BHP.

Canada�s newspaper of record, Globe and Mail of Toronto, reports that the Canadian government was spared the need to make such a decision on the London Stock Exchange�s recent bid for the TMX Group, when LSE backed away after it became clear it did not have enough support from TMX�s shareholders.

�But,� the Globe added, �people involved in the TMX saga say that (Canadian) politicians made it clear in closed-door meetings that they were loath to reject another bid in the wake of Potash.�

That rejection would have left egg � or potash � on Canada�s face.

Major Canada brand

Still, when asked about RIM and a possible takeover, Harper said recently, �We all know this is an important Canadian company.� Canada has shown reluctance to let foreign companies buy major domestic corporations

This complicated situation indeed begs for clarity on the part of the Canadian government � before any hostile American takeover is announced.

Ottawa saying �Don�t even THINK about taking over RIM,� while bad news for potential suitors, would arguably be preferable to the current nebulous situation.

The Potash decision makes it look like these calls are made at the whim of politics. (Does the name �Keystone-XL� sound familiar?).

Canada needs to let the world know one way or the other whether it�s in favor of foreign investment.

Bill Mann is a MarketWatch columnist, based in Port Townsend, Wash.

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Would Ottawa block a RIM takeover? - Bill Mann's Canada - MarketWatch

If not a takeover then what? A slow death like Nortel? A slow death like Corel?

Not saying that RIM is a dying brand, but sometimes things don't work out and you need to inject some new blood. If RIM was to disappear, there are still lots of choices in buying phones so I don't see a need to protect a company simply because it is Canadian. How much tax revenue does RIM generate for Canada? How much would it generate if it was sold off to Samsung or someone else?

Originally Posted by PineappleUnderTheSea

If not a takeover then what? A slow death like Nortel? A slow death like Corel?

Not saying that RIM is a dying brand, but sometimes things don't work out and you need to inject some new blood. If RIM was to disappear, there are still lots of choices in buying phones so I don't see a need to protect a company simply because it is Canadian. How much tax revenue does RIM generate for Canada? How much would it generate if it was sold off to Samsung or someone else?

RIM has changed some management, and their board of directors is about to change,
Their philosophy has changed as well, as they NEVER would have delayed a product launch to have cutting edge hardware in the past.

If RIM is sold to Samsung the potential is devastating for the Kitchener Waterloo economy, as Samsung would not need to maintain management structure in Ontario, as they have their own, why keep manufacturing in Ontario? they have their own globally, RIM would be purchased for its IP and customer base, and some 10,000 Canadian RIM Employee's would be out of work. That is how it could effect Canada.

As for "Lots of Choices" There are lots of SLAB choices for phones, RIM is the only company attempting to provide high end qwerty devices. they are a niche product that should not go away.

Originally Posted by PineappleUnderTheSea

If not a takeover then what? A slow death like Nortel? A slow death like Corel?

Not saying that RIM is a dying brand, but sometimes things don't work out and you need to inject some new blood. If RIM was to disappear, there are still lots of choices in buying phones so I don't see a need to protect a company simply because it is Canadian. How much tax revenue does RIM generate for Canada? How much would it generate if it was sold off to Samsung or someone else?

I think Samsung would be a great play for R.I.M. It would give them access to line of phones that people seem to like a great deal. I also thought HTC would be a great partnership.

One way or the other, R.I.M. will not look the same 12 months from now.

the rumours are that they're running around looking for buyers, so you cant really call it a takeover. And couldn't have said it better myself than the above. Many people; experts, analysts and everyday users have been calling this for ages now. In one way happy to see that I was right and so many fanboys here were wrong. But it is a shame that they really cant revamp and try and steer out of the s rather than sell off/out.

1. RIM is not dying. Their stock is **** but the finances are mostly sound. They're still increasing their number of subscribers, though not as fast as Apple and Google.

2. RIM's products are used by the government and the military. If RIM was sold to a foreign company that would be a critical security issue.

That is all.

Originally Posted by deRusett

1.) If RIM is sold to Samsung the potential is devastating for the Kitchener Waterloo economy, as Samsung would not need to maintain management structure in Ontario, as they have their own, why keep manufacturing in Ontario? they have their own globally, RIM would be purchased for its IP and customer base, and some 10,000 Canadian RIM Employee's would be out of work. That is how it could effect Canada.

2.) As for "Lots of Choices" There are lots of SLAB choices for phones, RIM is the only company attempting to provide high end qwerty devices. they are a niche product that should not go away.

1.) This is not necessarily true. Stipulations could be made that BB phones continue to be manufactured in Canada. Also if QNX R&D is based in Canada(remember Samsung makes phones, but not the OS') then any R.I.M./Samsung devices could also be manufactured here in North America.

2.) A qwerty device that consumers are overwhelmingly saying does not affect their decision when making smartphone purchases.

Little more than a 6% Market share in the U.S.(World's second largest smartphone consumer). China(now the world's largest smartphone consumer nation prefers Nokia and Samsung.

Based on the recent mob at the Bejing Apple store when the iPhone 4S went on sale(Apple's share of the Chinese market has grown by 710%, Samsung's has grown by 805%), I would suspect that Apple and Samsung will both soon hold a solid stake in the Chinese Smart Phone market.

As a guy who had all versions on the Palm Treos(650, 700p, 755p, all still here in a box somewhere) and then evolved to the Palm Pre. I completely understand those who love the keyboards, but I can say that after the Pre went defunct and I moved to the HTC EVO, I myself was surprised how quickly I adapted to a touchscreen.

You can go with the wind or be broken by it.

Originally Posted by deRusett

If RIM is sold to Samsung the potential is devastating for the Kitchener Waterloo economy, as Samsung would not need to maintain management structure in Ontario, as they have their own, why keep manufacturing in Ontario? they have their own globally, RIM would be purchased for its IP and customer base, and some 10,000 Canadian RIM Employee's would be out of work. That is how it could effect Canada.

As for "Lots of Choices" There are lots of SLAB choices for phones, RIM is the only company attempting to provide high end qwerty devices. they are a niche product that should not go away.

It's a gamble: if Ottawa intervenes and RIM remains as is, then there is the possibility that the situation could worsen and many of these workers are laid off as most operations move to lower cost countries (molding is already done overseas anyway, right?). It often takes years and years to get back on track, look at Moto, even with some popular phones they are still hurting. Then again, Samsung could also shut the whole thing down only to use the BB brand name and not much else, which in the back of my mind is what they want to do.

I know is sounds crazy, but if RIM "had" to be sold, I'd rather have a company like Apple buy out RIM, at least they pay attention to the minute details, they might bring a fresh perspective to a better keyboard experience, etc. etc. But I'll just get flamed for saying that...

Originally Posted by PineappleUnderTheSea

It's a gamble: if Ottawa intervenes and RIM remains as is, then there is the possibility that the situation could worsen and many of these workers are laid off as most operations move to lower cost countries (molding is already done overseas anyway, right?). It often takes years and years to get back on track, look at Moto, even with some popular phones they are still hurting. Then again, Samsung could also shut the whole thing down only to use the BB brand name and not much else, which in the back of my mind is what they want to do.

I know is sounds crazy, but if RIM "had" to be sold, I'd rather have a company like Apple buy out RIM, at least they pay attention to the minute details, they might bring a fresh perspective to a better keyboard experience, etc. etc. But I'll just get flamed for saying that...

Agree with your 1st comment. Something's gotta give one way or the other.

Hard to see Apple with R.I.M. Different cultures altogether.