RIM: Investors Spooked On Effort to Buy Nortel Assets

Investors are a bit uneasy today with Research in Motion’s (RIMM) disclosure early this morning that it was trying to bid in the bankruptcy auction coming up this Friday for wireless assets of Nortel (NT), the defunct Canadian telecom equipment vendor.

Research in Motion issued a statement late last night/early this morning saying that it was hoping to purchase the CDMA and Long-Term Evolution (LTE) access business of Nortel, along with some other parts of the company, for about $1.1 billion, but Nortel and its advisors had effectively blocked RIM from bidding through a technicality in the terms of the auction.

Nortel already has a buyer in hand: Nokia’s (NOK) Nokia/Siemens Networks unit announced back on June 20 that it had agreed to pay $650 million for the CDMA and LTE business, which sells equipment to phone companies to run their wireless networks.

As a Canadian company, RIM wants to keep Toronto-based Nortel’s jobs in the country, said co-CEO Jim Balsillie in the statement, and Balsillie expressed dissatisfaction that Nortel had blocked the company by including in terms of the auction that RIM would not be able to bid on any other Nortel assets for a year if it did bid this time around.

According to RIM’s statement:

“In seeking to impose this condition, Nortel and its advisors were fully aware of RIM’s desire to purchase other Nortel assets as part of a solution to retain key portions of Nortel’s business under Canadian ownership.  Despite repeated efforts, Nortel, its advisors and its court-appointed monitor have rejected RIM’s repeated attempts to engage in meaningful discussions.”

Ittai Kidron with Oppenheimer & Co. this morning speculates that RIM doesn’t actually want the equipment business contained in LTE and CDMA — why would the company want to add selling network equipment to selling handsets, after all? He thinks RIM would immediately sell the equipment business and that the company’s real goal is the collection of patents on CDMA and LTE technology that would come with the bid. He thinks RIM will continue to press to be allowed to bid and that releasing the statement today was a way to make a public case for its involvement.

Meantime, UBS Securities analyst Maynard Um seems somewhat more puzzled by the whole matter: “By having a more direct participation in the infrastructure market, RIM could try to help shape/direct future technology standards (presumably some patentable) & thereby give it a potential advantage on handsets (or at least help reduce royalty burdens).,” he writes. However, “Aside from this longer-term in scope benefit, we find it difficult to understand why RIM would want to enter the infrastructure mkt given its lack of scale/experience as well as lower industry margin structure.”

Research in Motion shares today are down $1.92, or 2.6%, at $73.05.