RIM considers split, handset unit sell-off: Palm 'Groundhog Day?'

Summary:A Sunday newspaper claims the struggling BlackBerry maker could split in two and sell off its smartphone-making division -- in what is reminiscent of how Palm met its demise.

Research in Motion is considering splitting the company in two, according to a paywalled story by London's The Sunday Times.

The BlackBerry maker could see its struggling smartphone hardware sold off, and its data network retained or licensed to others.

RIM is expected in the coming days to announce an operating loss for its first-quarter. Since then, its stock price has dropped significantly and for a short while dipped below the $10 a share mark.

The newspaper cited Amazon and Facebook as possible buyers of the hardware business at a knocked-down price.

Interestingly, Facebook has repeatedly denied it has a smartphone in development. Amazon has fringed on the tablet scene with its range of e-readers and its Android-powered Kindle Fire, but has shown no apparent interest in engaging with the smartphone market for now.

Without citing sources, the data network and BlackBerry Messenger software would likely see it opened up to smartphone rivals, such as Apple or Google. It's also possible for the company to retain hold of its data-offering infrastructure and license it out to others, such as Android vendor Samsung.

RIM chief executive Thorsten Heins said in May, announcing the likelihood of an operating loss on deck, that the company will "evaluate the relative merits and feasibility of various financial strategies, including opportunities to leverage the BlackBerry platform through partnerships, licensing opportunities and strategic business model alternatives."

Or failing that, the company could remain as one and sold in its entirety, such as to Microsoft, the newspaper added.

In a nutshell, RIM isn't looking for an all-out buyout and would rather separate, split, and sell off sections as and when it needs to. It should come as no surprise in fact as the Sunday Times has effectively laid out all of RIM's cards on the table.

The newspaper said RIM could announce such plans at some point during this summer.

Splitting the company into two divisions could be dangerous for the other. Blackberry smartphones require the data network for email and browsing, while RIM's data network is all but completely worthless without BlackBerry phones.

RIM's acquisition of Ubitexx in May 2011 could open up the data network to other smartphone makers, in what now appears in hindsight to be a strategic move in case all else failed.

BlackBerry Mobile Fusion allows enterprise-like secure email for iPhones and Android devices. However, the software would likely be sold to enterprises that already have their own BlackBerry enterprise (BES) infrastructure, and it is unlikely that OEMs like Samsung or HTC would pay licensing fees for the privilege of operating on its network.

But those thinking back not so long ago will no doubt remember that smartphone maker Palm met an eerily similar set of circumstances.

In the mid-2000's, Palm Computing voluntarily split into two, which then became PalmOne, which created Palm-related hardware, while PalmSource developed operating system software. PalmOne changed its name back to Palm Inc. in 2005, while later that year PalmSource was acquired by ACCESS.

HP bought Palm in 2010 for $1.2 billion in cash following dwindling sales. After a series of failed CEO transitions and poorly executed management strategy, HP as a whole company suffered financially. A year later, the PC maker said it would cease production on anything Palm related.

Had Palm carried on as a separate company without HP's buyout bid, the current duopoly of smartphone behemoths notwithstanding, the company may have had a shot had it continued to compete in the market share race.

If history is to be our guide, RIM could be facing a similar downfall to that of Palm.

If RIM splits into a data network and a hardware company, the hardware side under a different owner could eventually run Android or even Windows Phone software, and would not have to be limited to BlackBerry 10.

Where that leaves RIM's forthcoming operating system --- which the company has invested so much into, even as much as laying off employees not involved in the software effort --- it remains unclear.

Related:

Topics: Hardware, BlackBerry, Hewlett-Packard, Mobility, Networking, Security, Smartphones

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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