Ingram: Who is helping whom?

For something that seemed like a blockbuster deal, the announcement that Research In Motion would license its BlackBerry email software to handheld maker (and competitor) Palm Inc. did surprisingly little to boost RIM's stock price.

After spiking by a small amount on Monday, the shares drifted back down to about where they were a week ago, which is about 20-per-cent lower than they were in September, and in fact isn't that far off the 52-week low of $60 (U.S.) the shares hit in March. Why would a deal to license its software to Palm -- a company that virtually invented the handheld market, and has one of the hottest devices going in its Treo 650 smart-phone -- cause such a muted reaction from the stock market?

There are a couple of possible explanations. One favoured by some analysts who follow the company is that this deal has already been “priced in” to the stock, which means that investors were more or less expecting RIM and Palm to do a deal. After all, RIM just recently signed a similar arrangement with cellphone-handset leader Nokia, so Palm shouldn't have come as a surprise.

That's difficult to rationalize, however, considering the company's share price is down by about 20 per cent. What else was being “priced in” to the stock that isn't being priced in any more? Another possibility is that investors are more concerned with the ongoing litigation between RIM and NTP, the U.S. company that claims it holds a patent on wireless e-mail technology.

There's a third concern that should be on that list, although it may or may not have occurred to some investors, and that is the fact that licensing deals such as the one with Palm represent a double-edged sword for the Waterloo, Ontario-based company. While they increase the penetration of its BlackBerry software, they also lend a helping hand to major competitors such as Palm and Nokia -- and that threatens the business that accounts for 70 per cent of RIM's revenue, which happens to be the sale of hardware, Globe and Mail reported.