On Monday, tech traders were trying to figure out how the game had changed after Googlestunned the Street by dropping $12.5 billion in cash or $40/share to acquire Motorola Mobility.
According to CEO Larry Page, “The acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable Google to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”
Among the many issues circulating on the floor was whether Google had overpaid for Motorola – Google paid a 63% premium to Friday’s close. Also traders were wondering what the deal means for other players.
What should you make of it? How should you position?
Instant Insights with the Fast Money traders
Pete Najarian thinks the stock to watch now is Research in Motion, which he calls a fallen star.
“They’re sitting on a mountain of cash – they generate a lot of cash – they’ve got a few patents of their own – they become interesting,” he says.
And what Najarian means by interesting is that after the acquisition of Motorola, another major player could find RIM attractive – especially now, after the stock has sold off so sharply.
Trader Steve Cortes is also watching RIM. “I do think the Motorola acquisition puts a bottom on RIM around $23,” he says. “I’d trade RIM long with a $22 stop.”
BGC analyst Colin Gillis is on the other side. He isn’t so sure RIM is a takeover target.
If a company is looking to make a move, it's likely Microsoft and Gillis doesn’t think a RIM acquisition makes sense because of the competing operating systems. “If Microsoft gets into the hardware business – I think it would be via Nokia,” says Gillis. But you might want to think twice before placing any bets. Gillis expects to see Microsoft remain agnostic and “let the hardware guys slug it out.”
Gillis, however, thinks the clear winner is Microsoft due to their Windows 7 OS. "If you’re HTC or Samsung and you wake up to find out that Google is a competitor – you’re calling Microsoft to find out about the Windows 7 phone operating system."