Why Blackberry (BBRY) Buyout Rumors Could Spark Bidding War
Why Blackberry (BBRY) Buyout Rumors Could Spark Bidding War Among Tech Giants
Rumors related to a possible acquisition of Blackberry by Samsung Group may end up starting a bidding war among tech giants, given its long list of patents assets and its attractive enterprise security features
BlackBerry Ltd. (NASDAQ:BBRY) may already have a huge target on its back as a potential acquisition in the eyes of tech
giants such as Google Inc(NASDAQ:GOOGL) and Microsoft Corporation(NASDAQ:MSFT), amid rumors of a potential buyout of the company by Samsung Group (OTCMKTS:SSNLF). The rumors over the last 24 hours have fueled much speculation that could signal a possible bidding war over some of Blackberry’s assets.
BlackBerry shares jumped 30% in late trading yesterday after Reuters cited an unnamed source and reported that executives from Samsung and Blackberry were negotiating an acquisition deal, wherein Samsung was offering to purchase Blackberry for $7.5 billion. Blackberry shares subsequently fell 15% in after-hours trading as both parties negated the takeover claims.
Although the rumor itself may be "groundless" as one of Samsung representatives puts it, it may still end up harboring interest amongst tech giants in Blackberry’s assets, or more specifically, the company’s broad patent portfolio. Blackberry is an open play, despite company executives saying that the fallen smartphone maker is not for sale.
The Waterloo-based company already ranks amongst the top-75 annual patent receivers, with around 1,000 patents approved annually as per the statistics tabulated by the US Patent & Trademark Office (USPTO). In addition to filling its own patents, Blackberry also acquires a significant number of patents; the most notable example of this is the 6,000 patents it bought from Nortel for $4.5 billion.
The tech industry at large has witnessed patent-based acquisition on multiple occasions. Three years ago, Google purchased Motorola (including all its patents) for $9.8 billion in order to gear itself against increasing competition by the likes of Apple and Blackberry. Google subsequently sold the company to Lenovo last year, however it still retains its patents. Google could employ the same strategy once again by acquiring Blackberry.
Google could stand to benefit from such an acquisition. Blackberry, with all its shortcomings, is still miles ahead of other smartphone manufacturers when it comes to enterprise security. Given that the Android OS has been the subject of great criticism in terms of security, Google can address these concerns through this acquisition. Buying out Blackberry could also propel Google into the sought-after enterprise market.
On the other end, Google could also end up losing on large revenue if Blackberry were to be acquired by another Android-based smartphone maker. For instance, if Samsung (Google’s largest smartphone partner) were to acquire Blackberry, it may end up discontinuing Google’s Android in its smartphones, given thesecurity benefits associated with Blackberry’s OS and Samsung’s own upcoming Tizen OS.
Speculation regarding Google making a couple of blockbuster acquisitions this year is already rife. Analysts at Robert Baird recently outlined a possibility where Google could end up making a major acquisition this year using its substantial cash at hand to counter the slowdown in its search and ad businesses.
According to Blackberry’s management, the company is in the process of a major turn around with regards to its fundamental business operations, giving further rise to speculation that it may possibly be positioning itself as an attractive buy option among investors. The report on Reuters also pointed out that Blackberry has seen interest from several potential suitors, which it subsequently rejected on account of lower valuations; this indicates that the company is still adamant about turning itself around – or maybe it is just waiting for the right offer. Blackberry shares are down 17.3% as of 11:04 AM EST.
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