IBM and RIM

There was a time when getting out your BlackBerry was synonymous with being a cool young executive. You can remember people who had phones that beeped every time they received an e-mail, and they would act like they were the Fonz. But then a different fruit became king of the hill – Apple. You weren’t anyone without an iPhone. And now it’s probably Android for the really cool kids because you can control it – without needing to jail break it!

BlackBerry had a second wind. Lots of youngsters used BlackBerries because of the messaging facility. They could chat to their friends – using BBM – for free.

Research In Motion (RIM) – the company that makes BlackBerry phones – is based in Waterloo, Ontario, Canada. In January this year, Thorsten Heins took charge as CEO. He must be wondering what he can do to re-invigorate the firm. But there’s more to RIM than just the BlackBerry phone. There’s meant to be a new BlackBerry 10 operating system coming out next year, but, perhaps more importantly, RIM has a BlackBerry Enterprise Services (BES) unit, which operates a network of secure servers used to support BlackBerry devices.

The rumour mill suggests that this is what IBM has its eye on. And this is the reason that RIM stock jumped up by 9 percent. Although, at this stage, it is only a rumour. Both companies are saying the usual thing about not commenting on rumours – instead of looking blankly at the questioner and going, “what!!”.

Were IBM to buy the whole of RIM, that would be a very bold decision. As I said, the BlackBerry 10 operating system doesn’t come out until early next year. It might be possible to licence the OS to third parties, or they could sell off RIM’s Network Operations Centre (NOC). The NOC transmits all BlackBerry data for both enterprise and consumers. If IBM were to keep the handset division, they would need to encourage developers to write apps for them. At the moment there are apps for iPhones, Android, and, when the new Surface tablet comes out with Windows 8, there’s likely to be a lot of development enthusiasm there. But I’m not sure there’s any real excitement to develop apps for the BlackBerry.

So, it’s more likely that IBM has its sights set on the enterprise services unit, which has pretty good security software that it uses to give IT departments control over corporate information. The encryption algorithms its uses make it very difficult for anyone to intercept e-mails or instant messages (BBM). This makes it very popular with people in banking and other financial services. According to RIM, there are 250,000 BlackBerry Enterprise Services (BES) servers installed worldwide.

However, if IBM doesn’t buy the NOC part of the business, they’ll need to come to some sort of working agreement with RIM (or whoever owns that part) over who has control over IBM’s customers’ traffic using it.

From a BlackBerry customer perspective, knowing IBM was looking after enterprise services would seem like a good thing. From IBM’s perspective, they would get access to a way of transmitting secure data from a platform that they don’t currently include in their portfolio – mobile computing. And IBM could add the software into (probably) WebSphere.

But whether IBM should do it or not depends on how much it’s going to cost them. RIM may well claim that they are making pots of money from the fees they charge mobile carriers for subscriber access to their network. They may say that the new operating system will see a resurgence of their popularity. If that were the case, then I would advise IBM to walk away now. If, on the other hand, IBM can get access to the security algorithms and the servers in use at financial institutions for a reasonable sum, then why not? Or if IBM thinks Oracle might be interested – then perhaps they should snap it up.

But, who knows? After all, it’s only a rumour!