After Google-Motorola Deal Are Nokia and RIM Next?

After Google (NASDAQ:GOOG) announced its acquisition of Motorola Mobility (NYSE:MMI), Nokia’s (NYSE:NOK) stock shot up by more than 17% while Research in Motion’s (NASDAQ:RIMM) stock increased by around 10%. Since Google offered to buy Motorola Mobility at a 60% premium over Motorola’s Friday closing price, it led many to believe that struggling players like Nokia and RIM might be good buy-out candidates too. For Nokia, another reason for the spurt was that the deal may encourage some Android phone manufacturers to switch away from Google and adopt platforms such as Microsoft’s (NASDAQ:MSFT) Windows Phone 7. Nokia indirectly benefits from this shift as it is already in the process of adopting Microsoft’s platform for its smartphones.

With the jump in these stocks yesterday our $6.65 price estimate for Nokia stock is now just about 5% above market price and our $42.60 price estimate for RIM stock is about 60% above market price.

Google paid a hefty premium for Motorola Mobility

Google’s $40-a-share offer is a 63% premium to Motorola’s Friday closing price, signifying how competitive the smartphone market has become. Both Nokia and RIM’s stock has already taken a beating this year, and it has led the market to believe that these companies could be good acquisition targets too. We wrote earlier than Motorla’s patent portfolio and commitment to growing its mobile search ad market share supported this decision. See our notes Google Pays a Princely Premium for Motorola’s Patents and Are Cheap Google-Motorola Smartphones on the Way?.

What if Android adopters turn to Windows

Google Android has been gaining smartphone market share rapidly in the last few quarters. According to a recent Comscore report, Android continues to extend its lead over its competitors in the U.S. smartphone subscriber market, and its market share now stands at around 40%. ^[1] However, the Google-Motorola deal could change this equation in favor of pure smartphone software players like Microsoft as Google becomes a rival to Android phone manufacturers.

Nokia, which announced its partnership with Microsoft earlier this year, is set to introduce Windows based smartphones by the end of this year. Nokia is betting big on this transition as its fortunes have declined amid stiff competition from Android and Apple (NASDAQ:AAPL). As more users increased the adoption and popularity of the Windows platform could help Nokia in this regard.

What do you think? Are RIM and Nokia potential takeouts as well? Contribute to the discussion in the comment box below.

See our complete analysis for Nokia stock here

1. Comscore report, August 4th, 2011 [↩]