There may be a method behind RIM’s mad bid for Nortel assets

Research in Motion’s media blitz to force a rule change on the auction for Nortel Networks' assets appears to have backfired, leaving many analysts and pundits scratching their heads. But others wonder if a larger strategy is at play. As it stands, the Waterloo-based company has thrown a wrench into the auction process by offering $1.1-billion for Nortel’s wireless unit, but not doing it as part of the formal, court-ordered process, arguing that it has been shut out from bidding on some assets. RIM has asked Ottawa to re-open the bidding, but to no avail. “I can’t for the life of me see why RIM would want CDMA or LTE base station assets,” Mark Tauschek, lead analyst at Waterloo-headquartered research firm Info-Tech Research Group, tells Report on Wireless. “I’m guessing that the intellectual property pieces that RIM wants aren’t part of that wireless unit as set out in the auction rules.” Tauschek says that the CDMA assets won’t be worth much in a few years as the technology is moth-balled. LTE, or “long term evolution”, is seen by most analysts as the future of mobile broadband, but Tauschek points out that LTE is a standard, and as such doesn’t involve a lot of patenting. Others have suggested the gold is in Nortel’s Multiple Input Multiple Output (MIMO) patents, as this has broad applicability to handsets. “Nortel looks like the bad guy here, but they’re between a rock and a hard place,” says Lawrence Surtees, International Data Corp.’s (IDC’s) lead analyst covering the Canadian telecom services sector. “What Nortel has said seems fair – it is not their rules or their process now. It is mediated by a court. Nortel can’t sit in a room and say, ‘forget about the courts, we’ll talk to you alone’.” Meanwhile, the bidding war has heated up: Nokia Siemens started by offering $650-million (all figures in $US) for the wireless division, then US-headquartered MatlinPatterson Global Advisers LLC ponied up with $725 million, and Ericsson topped them both with an offer of $730 million. As RIM’s chances dim, speculation has arisen as to whether or not co-CEO Jim Balsillie is not in fact playing out a larger strategy. “It is not out of the question that in the back of Balsillie’s mind is a desire to start a bidding war – it’s already happened,” says Tauschek. “We don’t know whether or not MatlinPatterson or Ericcson were going to join the fray or not, but the fact is they both came in after RIM’s $1.1 billion bid.” In effect, RIM has created an environment where the competition is paying more for assets that it doesn’t want, and that, by adding conditions for additional assets outside of the bid process, has also made it virtually impossible for RIM to part with its money. At the very least, Tauschek says that RIM may be trying to be disruptive. “The auction rules were set out at the end of June,” he says. “At that time RIM didn’t have a problem. Now, weeks later, a few days before the auction, they want to make a bid but are not prepared to sign an NDA or abide by the rules. Surtees suggests that the way things are playing out reflects something of the character of co-CEO Balsillie. It has many similarities to his attempt to by-pass National Hockey League rules, and appeal to Canadian nationalism, to bring the Phoenix Coyotes hockey franchise to southern Ontario. “I think it is a fair comment that Jim Balsillie is treating this much like the NHL and other things,” says Surtees. “There is a personal element here that says, ‘If I don’t get my way I’ll go to the politicians and the media’.” What makes the behaviour even more suspect is that it may not be necessary, and could in fact be a strategic move to set the table for future negotiations. Nortel has left the door open by saying that the other transaction is “on hold”. As well, RIM can make a submission to the bankruptcy court in Delaware next week. But they have to tread softly, because Nortel won’t compromise its position with the court. “If Nortel does something to piss-off the court they would be in deep trouble,” says Surtees. “They have to go through the process, otherwise it might jeopardize everything.”

There may be a method behind RIM’s mad bid for Nortel assets

News | July 23, 2009

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