It’s deja vu all over again. On March 11, a Lenovo executive speculated about acquiring smartphone manufacturer Research In Motion Ltd (NASDAQ:BBRY). Lenovo CEO Yang Yuanqing’s recent quote in a French paper, in which he says he would “eventually consider buying” Research In Motion Ltd (NASDAQ:BBRY), comes just a couple of months after Lenovo’s CFO, Wong Wai Ming, alluded to the same thing.
Buyout talk makes for interesting water-cooler discussions, but does it suddenly make Research In Motion Ltd (NASDAQ:BBRY) a better investment today than it was last week?
Investing in buyout talk can be risky
Shareholders sure didn’t mind Yuanqing’s latest blurb in the French paper; Research In Motion Ltd (NASDAQ:BBRY)’s stock price jumped 14% on Monday. Research In Motion Ltd (NASDAQ:BBRY) CEO Thorsten Heins isn’t talking about the latest quotes, but he previously said he didn’t know why Ming had made similar remarks. Unless there are stealthy meetings going on, Heins is probably wondering the same thing this go-round, too.
Though not entirely opposed to discussing a deal for Research In Motion Ltd (NASDAQ:BBRY), Heins has made it pretty clear he’d rather focus on the Z10 and Q10 rollouts, exploring licensing opportunities for BB10 and other revenue-generating initiatives, rather than put Research In Motion Ltd (NASDAQ:BBRY) on the auction block. And in spite of Research In Motion Ltd (NASDAQ:BBRY)’s recent stock-price jump, buyouts are far from a sure thing for investors.
In some cases, acquisitions can pay off, as Heinz shareholders found out recently following Warren Buffett’s attempt to get heavy into ketchup.
However, Dell Inc. (NASDAQ:DELL) offers the opposite side of the buyout coin. Initially, Dell Inc. (NASDAQ:DELL) owners were ecstatic with the 25% premium CEO Michael Dell and his group offered. But they quickly came down to Earth after big-time investors, including Carl Icahn, T. Rowe Price, and others, started grumbling about its valuation. The Dell Inc. (NASDAQ:DELL) deal may still get done, but it demonstrates the uncertainties surrounding investing on rumors, particularly buyout rumors.