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BW Businessworld

Lenovo Sees RIM As A Takeover Target

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A senior Lenovo executive said on 24 January that the Chinese computer maker may consider Research in Motion as a takeover target, sending the Blackberry maker's shares up 2 per cent just a week before it launches a make-or-break line of redesigned smartphones.

But Levovo, which vaulted into the personal computer market with its 2005 purchase of IBM's PC division, would face formidable hurdles if it tried to buy a company that Canadian Prime Minister Stephen Harper once described as a national "crown jewel." The Chinese company would also encounter tough regulatory scrutiny in Washington, cybersecurity experts say.

Lenovo, on track to become the world's largest PC maker, has held talks with RIM and its bankers about various combinations or strategic ventures, its chief financial officer, Wong Wai Ming, said on Thursday.

"We are looking at all opportunities - RIM and many others," Wong told Bloomberg in an interview at the World Economic Forum's annual meeting in Davos, Switzerland. "We'll have no hesitation if the right opportunity comes along."

A spokesman for Lenovo said Wong was asked about RIM by the Bloomberg journalist and that Wong was speaking broadly about Lenovo's M&A strategy.

Crucial Juncture
RIM, once a pioneer in the smartphone industry, has struggled in recent years as its aging line-up of devices have ceded market share to Apple Inc's iPhone and devices based on Google Inc's Android operating system.

RIM hopes its new touch-screen and keyboard devices, powered by its new BlackBerry 10 operating system, will help it claw back some of the lost ground. Optimism surrounding the launch has powered the stock higher in recent weeks.

Last May the Waterloo, Ontario-based company announced a far-reaching strategic review under which it was expected to examine all options, from software licensing deals to an outright sale of the company.

Earlier this week, RIM shares surged to a 13-month high after Chief Executive Thorsten Heins said RIM might consider strategic alliances with other companies after next week's BlackBerry 10 launch.

In an interview with a German newspaper on Monday, Heins said RIM's ongoing strategic review could lead to the sale of its handset business or the licensing of its software to rival smartphone companies.

Even so, analysts expressed skepticism about a Lenovo bid. "Anybody who's serious about buying a company doesn't go talking it up... It sounds to me like a comment made more for publicity's sake than a serious approach for RIM," said Charter Equity analyst Ed Snyder. "It is a very long shot at the best.'

Net Benefit Test
Any bid for RIM would face a rigorous review by the Ottawa to determine whether the deal would bring a "net benefit" to Canada. The Investment Canada Act gives the government the authority to kill deals that could harm Canadian interests or threaten the country's national security.

In response to the comments by Heins, Canada's Industry Minister Christian Paradis told Reuters earlier this week that Canada may even go to the extent of reviewing a sale of RIM's handset business if such a deal was proposed.

"Research in Motion has made an important contribution to information and communications technology in Canada, a sector that is so important to the Canadian economy. We hope they continue to do so well into the future," Paradis said in an emailed response to the Lenovo comments on Thursday.