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Rejection Leaves RIM in Need of Security

Stocks in this article: RIMM CIC.TO

BlackBerry-maker Research In Motion (RIMM) has dropped its $53 million bid for Canadian security specialist Certicom (CIC.TO) after an Ontario court blocked its hostile takeover.

RIM confirmed that it had pulled its bid in a statement late Tuesday, citing the Ontario Superior Court of Justice's ruling.

The court granted a permanent injunction restraining the bid earlier this week, according to a Certicom press release. The wireless security specialist had applied for the injunction, claiming that RIM had breached nondisclosure agreements entered into by the two firms in 2007 and 2008 by using confidential and proprietary Certicom information for its takeover bid.

RIM launched its Certicom bid in December through one of the smartphone specialist's subsidiaries. The move could have bolstered RIM's ability to secure Internet data and potentially squeeze the competition.

Certicom develops a technology called Elliptic Curve Cryptography (ECC), which is used to secure data on a range of devices, including smartphones. The National Security Agency uses the same technique, and Certicom licenses its technology to a range of companies, including IBM (IBM), General Dynamics (GD), Motorola (MOT) and RIM.

From the outset, however, Certicom resisted RIM's bid to acquire the company and its intellectual property. In late December, for example, the Mississauga, Ontario-based firm's board urged its shareholders to reject the takeover, arguing that the $1.21 a share bid significantly undervalued the security firm.

RIM now faces the prospect of increasing its Certicom bid or looking elsewhere to boost its security portfolio, something which could prove prohibitively expensive and difficult to achieve. Certicom competitors include big names such as EMC's (EMC) RSA division, Entrust (ENTU) and VeriSign (VRSN).

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