RIM's $1.50 Certicom bid just the beginning

It isn’t like I have any particular insight into what’s going on with the Research In Motion (RIM:TSX, RIMM:Q) hostile bid for Certicom (CIC:TSX). But I can do math (the poison dwarf mightn’t agree with that view btw). A $66 million bid for a $26 million run rate revenue software security IP-heavy company with $33 million in cash on hand just isn’t the last word. RIM is offering just over 1x the annualized last quarter of revenue. My friends at TDSI (financial advisor to CIC) will tell you that security names attract acqusition multiples in the order of 7-10x revenue in normal markets. This isn’t a normal market, but you aren’t getting it for the price that would make even Steve Sadler blush.

If RIM is still paying Certicom $0.25 per handset sale as a royalty fee for the right to use Certicom’s ECC to sercure their BlackBerry handsets, you can see why they want to own the entire company for an EV of $33 million; beats paying something like $600k per quarter (on 2.6 million handset sales in the Q) for the rest of your natural born days. And then there all the fees you get to charge your competitors, push Sony around in the final stages of the patent lawsuit and so forth.

I know that it is a tough market to pull off an M&A deal. But Certicom has world-leading security technology (see prior post “Obama, his BlackBerry and the spies” November 19-08). And once it’s gone…. This opening bid will not be the last word.

Here’s the Seeking Alpha link to the post.

MRM
(disclosure – I own RIM)