RIM Spikes 13%, But Bernstein Skeptical Of Take-Out Talk

On the heels of another round of rumors yesterday that Research in Motion (RIMM) might be shopping itself around, or that activist investor Carl Icahn may be looking to load up on the stock, Sanford Bernstein’s Pierre Ferragu this morning writes that while RIM stock is “a bargain in many respects �� we don’t see any likely buyer out there.”

RIM shares today are benefitting mightily not just from rumors of that sort, but also from the disappointment felt over Apple’s (AAPL) iPhone 4S product unveiling yesterday. The stock is up $2.69, or almost 13%, at $23.69.

Ferragu writes that he’s been bombarded by clients wanting to know what the bull case is if the company were to change its executive team or contemplate M&A.

He notes that the stock trades at just 3.6 times the cash stream generated by its service fees in the last twelve months. The means a pretty clear path to payback:

“A buyer paying a 50% premium would pay-back 49% of its investment with the cash RIM can generate in the next 3 years from the service fee it charges monthly per user, mostly from a slow moving corporate user base,” he writes.

And the company’s client base of BlackBerry users is now trading at the equivalent of $160 per user.

“Many companies could be interested in such an asset,” he observes.

“As a couple of illustrations only, without expressing any opinion on the likelihood of such moves, a Microsoft (MSFT) could consider such an acquisition and invest another few hundreds of dollars in offering replacement phones based on Mango, offering the Blackberry email experience and the popular BBM service.”

“This would potentially quintuple Window’s 7 current user base!”

Alas, there are no likely buyer! s, he co ncludes:

HTC (2498TW) does not have the balance sheet required for an all-cash acquisition and we believe RIM’s board would be unlikely to approve a share swap offer. We believe that Microsoft still sticks to its “no hardware” policy in terms of acquisition in the mobile space. Samsung [Electronics (SSNLF)] and Apple are unlikely to look closely at the opportunity as they don’t really need it and probably see as much value in letting RIM continue to lose ground than in attempted a hostile and complicated acquisition. Lastly, we do not think Google (GOOG)has any appetite for acquiring any hardware business. MMI was an exception to the rule solely driven by Motorola’s patent portfolio.

And Icahn or another activist would find this a tough nut to crack:

We believe an activist play is unlikely. Extricating the company from the founder-CEOs would be challenging. We believe that Mr [Mike] Lazaridis and [Jim] Basillie would be opposed to handing over the reins to an outsider (Exhibits 9 & 10). The co-CEOS control over 10% of the company’s stock, so any activist that attempts to wrest control against management’s will, would need to secure a high level of support among the remaining investors or else commit substantial capital to the task. We don’t see any likely candidate at this stage. The lack of independence of RIM’s board has been widely criticised. The founder-CEOs also lead the board as co-Chairmen. Previous calls by investors to split the CEO and Chairman roles have been rebuffed by the co-CEOs, who have, so far, only agreed to form a committee to examine the company’s governance structure that will present their findings by January 2012.

Ferragu argues the outlook is not good on a go-it-alone basis: hands! et gross margin is “collapsing,” a trend unlikely to reverse itself; the growth in sales units is coming at the expense of average selling price, which is unsustainable; and the “window” to have fixed RIM’s product portfolio in his opinion has “most likely gone” as it has been “completely routed in high-end smartphones” while the oligopoly of Apple, HTC, and Samsung now expands to challenge it in the low end of the market.

Ferragu reiterates an Underperform rating on RIM shares and a $20 price target.

I would note that this morning comes yet another rumor: Dow Jones’s Kevin Kingsbury writes that European telco Vodafone (VOD) is rumored to be interested in RIM.