Microsoft Just Flat Out Needs RIMM? (NASDAQ:RIMM),(NASDAQ:MSFT),(NASDAQ:AAPL)

As the battle for mobile internet heats up, Apple Inc. (NASDAQ:AAPL) and Google Inc. (NASDAQ:GOOG) might be leaving Microsoft Corporation (NASDAQ:MSFT) in the dust.  This means that for Microsoft to seriously get into the game, they are going to need something… or someone.  The answer to that may just be Research In Motion Limited (USA) (NASDAQ:RIMM).  Investors have been showing where they put their money as Apple’s shares have trounced all others since the iPhone took hold.  That in turn may make RIMM a bargain.

Research 2.0’s Kris Tuttle brings us some compelling points about Microsoft’s needs as they may be slipping in the mobile market.  He writes, “Investors have clearly been voting with their feet when it comes to the battle for the Mobile Internet between Apple and Research in Motion (RIM). This comes at a time when it’s become crystal clear to all (including them) that Microsoft desperately needs a strong play in mobile but is too far behind to catch up without a major acquisition.

Put simply RIM is suffering from negative investor sentiment. Not only is it coming from Apple in the form of the iPhone but also in the shape of software and services under the Android umbrella from Google. Motorola appears more competitive thanks to Android. To add insult to injury people are starting to take Nokia more seriously in the space based on more claims by senior management about what’s coming in the future. (This from a company who for the first 16 months of board-level reporting had grouped “smart phones” into the “design and fashion” category instead of full-featured data!)

Based on Intrinsic Value (IV) RIM is the most undervalued company in the mobile space right now. And that’s factoring in all the present investor fears of slowing growth and lower margins for the next few years, almost dialing in a worst-case scenario. We admit that it doesn’t make RIM “cheap” as an acquisition but it does begin to make it look reasonable and potentially non-dilutive for Microsoft to consider.

The fact is Microsoft *NEEDS* more than just a strategy and technology, they need a footprint. The choices are few but Microsoft is large enough to buy any of them including Nokia. But Microsoft doesn’t need to be in the cell phone business the need to be in the mobile Internet space which is the world of the iPhone, Blackberry and Android class of device. Palm has some good technology but doesn’t come with a footprint, especially in the enterprise. Motorola has too much baggage in non-phone businesses and what they do have is now based on Android.

Read the rest of Tuttle’s article here and see his valuation chart for RIMM.