Microsoft buying RIM? What have the pundits been smoking?

Get a grip, people. Juicy rumours about Microsoft Corp. buying Research In Motion Ltd. Have swished around the market, and while most were quick to dismiss the chatter as background noise, some observers said the idea has merit.

Even though Microsoft has its own wireless product on the market, Windows Mobile, the giant tech company may want to snap up RIM in order to ward off other competitors. Apple Inc., with its iPhone, and Google Corp., with rumours of a new device, are both threats to dominate the wireless space Microsoft covets.

While RIM is one of the largest companies in Canada, analysts think it would be a breeze for Microsoft to purchase. Microsoft has a market capitalization of $266.7 billion US and had $34 billion in cash and short-term investments on hand at the end of fiscal 2006. RIM’s market cap totaled $48.95 billion Cdn at Thursday’s close, making it the fifth most valuable company in Canada but a reasonable meal for the software goliath.

“The amount (Microsoft) would pay for RIM is a little pimple on a hippo’s ass,” one analyst said.

Waterloo, Ont.-based RIM declined to comment on the rumours, as did Microsoft.

RIM stock closed at $87.71, up 91 cents for the day, after reaching as high as $89.68. At its peak, the stock was worth more than $50 billion for the first time.

Peter Misek, an analyst at Canaccord Adams, thinks an outright sale is unlikely but argues a partnership agreement would make sense.

Such a deal would be an about-face for Microsoft, but it would put it well ahead of Apple and Google in the mobile-device race and give RIM access to content such as television shows, games and movies.

RIM’s popularity has made it the subject of takeover rumours before, with Nokia often appearing as the predator. Motorola has also surfaced as a potential buyer, but RIM’s size likely puts it out of reach.

Misek said this is the first time Microsoft has been kicked around as the rumoured suitor.

He said any potential buyer would have to pay a 50-per-cent premium and have co-founders Jim Balsillie and Mike Lazaridis on board.

“I don’t see them as sellers,” he said. “Would you sell if you are just absolutely crushing it, and you still think you’re not even half done?”

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