MONTREAL — Takeover speculation that routinely swirls around Research In Motion Ltd. could reflect moves by U.S. hedge funds to target the BlackBerry maker and cash in on its struggles.
Shares in the Canadian technology icon (TSX:RIM) have jumped wildly, then dropped back, for much of the last year but especially in recent days on the latest takeover rumour in the market.
“Typically what happens is these funds take a position and they start spreading the rumour,” analyst Ashok Kumar of New York investment bank Rodman & Renshaw said.
“Whether there’s smoke or fire, that’s hard to ascertain,” said Kumar, who doesn’t see a specific suitor for RIM at this time.
The company faces big hurdles as it deals with mounting competition in the smartphone market and the growing speculation among analysts and industry experts that its days of rapid growth are behind it.
Technical and services disruption issues have also plagued RIM.
On Monday, large numbers of BlackBerry users across Europe, the Middle East and Africa were cut off from Internet and messaging services, phone companies in the affected regions said.
RIM gave few details beyond a brief statement saying that customers were “experiencing issues,” but telecommunications companies in the Middle East and Europe laid the blame at the Waterloo, Ont. company’s door.
Khaled Hegazy, Vodafone Egypt’s spokesman, said “there is a problem with the servers in Canada which is affecting service” in the region.
He said they expected it would take about another four hours to resolve the issue, which first appeared to crop up at about 6 a.m. ET.
RIM said in a statement emailed to The Canadian Press that it was “working to resolve an issue currently impacting some BlackBerry subscribers” in the Europe, Middle East and Africa region.
On North American stock markets, RIM’s shares have moved on rumours of activist investor Carl Icahn taking a position in the Waterloo, Ont., company. Icahn has made no comment on the rumour.
Shares have also jumped on a report that U.K. telecom giant Vodafone wanted to buy RIM and that RIM had hired an investment bank to review its strategic options, with the rumours coming at a time when the BlackBerry maker has lost market share to Apple’s iPhone and smartphones with Google’s Android operating system.
Past rumours have involved either software giant Microsoft or handset player Samsung being interested in buying RIM as the company’s shares have fallen. RIM shares were trading at a high of $149.90 in 2008 and closed Friday at $24.30, down $1.10 or 4.3 per cent on the Toronto Stock Exchange.
RIM was once worth about $70 billion and has, from time to time, been Canada’s most valuable company. Today it has a market value of about $12 billion or so, making it much more attractive as a takeover target.
Tom Caldwell, chairman and CEO of Caldwell Securities Ltd., said while “malevolence” can be involved from hedge companies, rumours can also start with the best of intentions.
“It can be a person in the company having a coffee or a beer with somebody and saying, ‘We don’t seem to be selling much of our product’ and that can develop its own swirl,” Caldwell said from Toronto.
Caldwell said with help from the Internet a hedge fund company can go after a company with negative comments through a blog, for example.
“There’s a lot of bear hedge funds in America that will attack a company,” he said.
Hedge funds try to maximize return on investment and are aggressively managed.
But the CEO’s personality and likeability also play roles when the stock falls, Caldwell said.
“Once the CEO is building the maxi yacht or the great mansion or trying to buy hockey teams, he is not paying attention to his business in my mind,” he said of co-CEO Jim Balsillie’s unsuccessful attempts to buy an NHL franchise.
“As the stock goes down, people look for someone to blame and it’s natural to try to blame the CEO and particularly when he’s got a profile of trying to do things unsuccessfully that don’t relate to his business.”
Institutional shareholder Jaguar Financial, in favour of RIM being acquired, has also criticized Balsillie’s pursuit of an NHL team.
“Steve Jobs, in a three- to four-year period, has captured the attention of people who want iPhones universally,” said Vic Alboini, chairman and CEO of Jaguar, which owns just under five per cent of RIM stock.
“During that same period of time, one of the two (RIM) co-CEO’s was off trying to buy a hockey team,” Alboini has said of Balsillie’s attempts to bring an NHL team to Hamilton, Ont.
Technology analyst Kevin Dede of Brigantine Advisors said it’s difficult to draw a conclusion from the stock’s recent volatility.
“Because the valuation is so low people are willing to take a little bit of a risk on a rumour, especially in buying,” he said from San Francisco.
But Dede has put a sell order on RIM’s shares due to performance.
“They’ve lost share hand over fist in North America,” which Dede described as the leading indicator of where mobile technology is going.
It doesn’t matter if RIM goes up for sale, he said, adding it’s really about pleasing customers.
“I would like them to bring handsets to the market that people like.”