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Even a bad RIM merger might be a good deal

Analysts are prepared for more bad news when the BlackBerry maker reports its second-quarter results this week.

DAVE CHIDLEY/THE CANADIAN PRESS

In September 2008, as the financial crisis was warming up, the talented New York Times reporter Andrew Ross Sorkin wrote a column suggesting the giant U.S. mortgage concerns Fannie Mae and Freddie Mac should merge.

The idea was the two would reestablish investor confidence and create value by cutting over a billion dollars in costs. But it was hard to see, even before their bailouts, how the idea wasn't just taking two bad companies and creating an even bigger, badder company.

Which brings us to a recent column on thestreet.com by contributor Rocco Pendola called "The only way HP, Dell and RIM can survive." And, you probably guessed Mr. Pendola's answer: "Feel the urge to merge and follow through."

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Hewlett-Packard's recent earnings warning, which sent its shares to multi-year lows, prompted Mr. Pendola's suggestion. He chafed at CEO Meg Whitman's suggestion that HP needs to be in the smartphone business, and suggested it can neither compete with Apple, nor with Cisco Systems and IBM in the software and services area.

"Didn't HP, and its equally-as-inept counterpart Dell learn anything from Research in Motion?" Mr. Pendola asked. "RIM taught us that after you admit defeat or, at the very least, no longer have the will to fight, you need to make major changes. Of course, RIM did not do this. It has basically decided it will chart the same strategy that failed under a new boss, who is, for all intent and purposes, same as the old boss."

Combining the three companies "might actually give them a fighting chance," he says, as long as "pretty much all upper management at all three companies needs to get blown out … Consolidate operations in Silicon Valley, Manhattan, Austin and Waterloo. Hire a young tech hotshot. Somebody with some vision. Somebody like Marissa Mayer, but even more aggressive. Create some excitement."

And Canadian regulatory concerns? "RIM has become such a national embarrassment that Canada should have been shopping the company around early in 2011," Mr. Pendola says, indelicately.

Mr. Pendola says his idea "sounds crazy." But, he says, "it's no more crazy than telling shareholders you're going to do what's already been done and fail at it one more time. By contrast, my idea appears far more sane and logical."

READERS: Is a RIM-HP-Dell merger a good idea? Is there a more perfect partner? Or should RIM keep going it alone?

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About the Author
Business and investing reporter and columnist

A business journalist since 1994, David Milstead began writing for The Globe and Mail in 2009. During eight years at the Rocky Mountain News in Denver, Colo., he individually or jointly won nine national awards from SABEW, the Society of American Business Editors and Writers. He has also worked at the Wall Street Journal. More

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