What's Going on with Research In Motion and Samsung?

Today, as Kevin already mentioned, BGR published a story talking about a potential sale of RIM to Samsung. Let's talk about this in a bit more detail. I think it's a darn interesting topic.

Clearly the stock market likes the idea. Just look at the stock. The Samsung rumour was published by BGR at around 11am, and the stock immediately spiked higher, and continued to drift higher throughout the afternoon. RIM is now up over 10% and it's safe to say the reason is purely based on the Samsung rumour.

RIM has been active clarifying false rumours lately ... often using Twitter. This time I don't expect them to open their mouths at all even if they see the story as misleading or incorrect.

Why? Because it is most likely that RIM is engaged in some sort of discussions with Samsung, and because when it comes to merger and acquisition rumours, it is safer to say nothing at all. Let the market work it all out. That's how most public companies roll.

The headline that BGR used was, "Research in Motion pushing for sale to Samsung". I personally have a hard time believing that Jim Balsillie is out there pushing hard for an outright sale of the company to anyone. Jim is a deal maker, sure. He has always been RIM's front man for cutting carrier deals, creating partnerships, and forging content relationships.

Those activities all involve building RIM into a bigger and better company. For better or for worse, he believes in the company. I don't see him pushing for a sale. I don't even believe the board of directors (outside of Jim) is ready to consider that yet.

Still, a deal with Samsung could make a lot of sense. When I say a deal with Samsung, let's include the potential sale of RIM (however unlikely) but let's also include a potential licensing deal for BlackBerry 10 and use of RIM infrastructure.

For good measure, I also think it's possible that Jim could be chasing an equity investment from Samsung. RIM's cash balance is significantly lower than its competitors, and an equity stake in RIM might make sense to Samsung. If Samsung took a stake in RIM it would send a strong message to the market about RIM's future.

What would RIM bring to Samsung? A lot. Let's go through some of the ways in which a partnership like this makes sense.

First, Samsung would reduce its reliance on Android. This OEM has become the clear leader in the Android hardware market. Samsung is a great hardware company but does not control a platform. It's easy to see how they might be attracted to the idea of having some control over a full mobile platform. They could develop hardware once and release it for both Android and BlackBerry 10 if they wanted.

Together with RIM, it's possible that all Samsung and RIM future devices could utilize services such as BBM, whereas this capability would not exist on other Android devices or on iOS. The size of the BBM user base would then expand dramatically.

Remember Metcalfe's law? The value of a network is proportional to square of the number of devices connected to that network. The same thing goes for social networks and users connected to that social network. BBM is a massive social network. It would be much more massive with Samsung supporting it on all their hardware out of the box. In the Android space, this would further help Samsung differentiate from other Android manufacturers.

Samsung could also implement QNX within its large family of home appliances. I can't really envision the value of QNX on a washing machine quite yet, but it would be nice to be able to stream HD video from a Playbook or other BlackBerry 10 device to a Samsung TV with no fancy configuration. Think out of the box support using NFC and DLNA. It's just so much easier to make it all happen when you team up. Consider also the stronge presence of QNX in automotive infotainment, which is a growing opportunity that Samsung could dive deeper into.

Samsung can surely already do much of this by using Android. But they do not control Android. Without control over the operating system (and developer tools, cloud services, etc), you are essentially a commodity hardware maker. If Samsung wants to be more than a hardware vendor then it would make a lot of sense to partner up with RIM.

Microsoft has done it with Nokia, and Google has done now done it with Motorola. Why not RIM and Sammy?

I'm a shareholder of RIM and I'm happy to see the stock up 10% today. I don't believe RIM is at the point where they are seeking out buyers, but instead partners. Samsung seems very logical.