RIM Buying Out Palm? It Could Happen

There is a rumor going around that Research in Motion (RIM) might acquire Palm, Inc.

According to the rumor, if RIM loses its patent-infringement lawsuit with NTP, the BlackBerry service will be shut down. If it owned Palm when this happened, RIM wouldn't be out of business.

The very idea is ridiculous.

NTP doesn't gain anything from putting RIM out of business. It doesn't have a competing product, and, in fact, has no real assets besides the patents that are at the heart of the lawsuit.

What the two companies are really fighting over is how much RIM will have to pay to license NTP's patents. They had even reached a licensing agreement earlier this year, but this fell apart when it seemed like the U.S. Patent Office might invalidate all NTP's patents.

Is It Possible?

While the reason given in the original rumor why RIM might be considering buying Palm is ridiculous, I've come up with some ideas why the basic rumor might be true.

Of course, I also came up with plenty of reasons why such a deal isn't likely to happen.

Much of my thinking revolves around "What would the two companies get out of such a deal?"

And both would have to agree. While RIM has the money, Palm is well protected against a hostile takeover. Its management would have to see big advantages in being bought out.

Good Idea

If RIM acquired Palm, it would get some important assets.

The main one is a Palm OS license and a bunch of developers skilled in making popular smartphones with it.

As user-friendly as as BlackBerries are, the platform is years behind the Palm OS in functionality. The same is true for third-party software written for RIM's handhelds.

The people and software that made the Treo line a success could really help RIM continue to compete against big guns like Microsoft and Nokia.

What Palm would get is the BlackBerry service itself, the gold standard in "push" email.

RIM is on the top of the heap in this area, and other companies like Microsoft, Nokia, and Palm itself are scrambling to catch up.

If Palm merged with RIM, it wouldn't have to worry about this any more.

Bad Idea

It would be a huge risk for RIM to switch to the Palm OS. It's been wildly successful with its own operating system, which it has complete control of.

A major change like switching to the Palm OS would almost certainly spook investors, dropping RIM's share price tremendously.

And if RIM isn't going to become a Palm OS licensee, then a buyout of Palm makes no sense.

The best way I can come up with the describe Palm's situation is, "Why buy the cow when milk is cheap?"

Palm doesn't have to be acquired by RIM in order to have access to the BlackBerry push email service. It's already licensed it, and the software will come out in just a few months.

Heck, RIM is even helping with the development. The more devices that use the service, the more people will have to pay a monthly fee to RIM, and the more companies will buy BlackBerry servers.

Anything Can Happen

Honestly, I don't think there's the slightest chance that RIM is going to buy Palm.

I just don't see what the two companies get out of it.

On the other hand, if you'd told me a few months ago that PalmSource was going to be acquired by a browser company based in Asia, I'd have given you that blank look that dogs have when they try to figure out what a ceiling fan is for.

Basically, the whole rumor is unlikely... but unlikely deals have happened before.