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November 2006

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RIMM and PALM to merge next Thursday??

Why PALM would choose RIMM:
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1) Management has indicated that they would prefer not to be bought out by a huge conglomerate, as to keep the entrepreneurial spirit alive, and keep their development teams from having to deal with bureaucratic red tape.
2) Reward employees
3) Quickly reward patient shareholders
4) RIMM has a great legal department. (They have lobbyists in DC also)
5) RIMM has a great investor relations dept.
6) They would be able to maintain their management structure. (Merger of equals)
7) PALM is starting to launch their own network services business. All those RIMM data-centers will come in handy.
8) Access to a great worldwide sales force, and distribution network
9) Remove a competitor
10) Acceleration of market dominance
11) I know this can't really be a reason, but might PALM management want to teach the shorts, who have been messing with their stock, a lesson?

Reasons for RIMM to buy PALM:
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RIMM needs PALM desperately. PALM Treos are replacing Blackberries in the Enterprise. WIth many more coinciding deployments.

RIMMs problems:
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1) Treo sales are about to pass Blackberry sales.
2) Microsoft's primary tool against RIMM is the Windows Mobile Treos. (The 700w, and the soon to be launched 750w)
3) Blackberry doesn't have Documents to Go
4) Blackberry doesn't function as a laptop replacement device
5) Blackberry doesn't have much multimedia capabilities to speak of
6) Blackberry had to swallow their pride and release a Blackberry client for the Treo
7) Blackberry sales growth is slowing to a halt, the stock price can't sustain for to much longer.
8) Blackberry doesn't have nearly as much 3rd party application support as Windows Mobile or PalmOS.
9) Blackberry doesn't have anything to counter the Motorola Q. The Treo 700p has overwhelming been reviwed as superior to the Motorola Q.

Based on this, RIMM needs PALM desperately, as it would solve all of their problems. PALM knows this, and despite their desire to remain independant, will be forced to take an "offer that can't be refused".

Check out these links, for proof RIMM and PALM are already working together. http://www.webwire.com/ViewPressRel.asp?SESSIONID=&aId=14748 and http://www.blackberry.com/ap/products/connect/treo650.shtml

I can only imagine that RIMM must be looking at sales figures for these Blackberry-Treos and seeing the writing on the wall for their hardware business.

A few strings to merger:
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1) PALM will insist on a merger of equals. (This would neccesitate a 2 PALM shares for 1 RIMM share swap + cash)
2) PALM will take the CEO stop.
3) Jim Balsillie has to go. He will be given a very nice package. The legal department isn't responsible for the NTP fiasco. Jim Balsillie is. He ignored good legal advice and almost got the company into bankruptcy. (RIMM's and PALM's boards are calling the shots now.)
4) The new company will be trading on the NASDAQ, under the symbol (PALM).

The 80+% of PALM that is held by instituations have been pressuring PALM to take a buyout. A buyout is in the works. RIMM is the most likely candidate, as they need PALM to survive.

RIMM scheduled their quarterly conference call to coincide with PALM's. I have a strong feeling that a joint announcement of this merger, is the real reason behind this apparent scheduling snafu.

And to add fuel to the speculative fire. Both companies had their CFOs at the Piper Jaffray 8th Annual Hardware & Communications Conference on May 11th. Could it be that they had some final numbers to work out?

RIMM: http://biz.yahoo.com/ccn/060502/200605020324950001.html?.v=1
PALM: http://www.unstrung.com/quote.asp?ID=3333125&Account=unstrung&Page=NewsRead

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