Yesterday Fairfax Financial Holdings, a Canadian insurance and investment company, has announced its intent to acquire BlackBerry for $9 a share in cash to take the company private.
The intent to privatize the company is nothing new as Mike Lazaridis, BlackBerry co-founder and previous co-CEO, has been courting investors for the same purpose. Unfortunately, going private doesn’t mean BlackBerry will miraculously recover from its misfortunes.
Fairfax already owns 10 percent of BlackBerry’s publicly traded shares, so it was not that surprising for the holdings firm to be interested in privatizing the company.
Though BlackBerry has already signed a “letter of intent agreement,” and trading on Nasdaq and the Toronto Stock Exchange halted because of the announcement, some still think that the Canadian company would be better off joining Microsoft’s family.
“What the market doesn’t need is a company to simply buy the patent portfolio and then start suing everyone in the market,” writes Wikibon Analyst Scott Lowe in an article yesterday. ”The market does need a company that can reasonably leverage the full range of assets.
“To that end, Microsoft now has a hardware arm courtesy of its Nokia buy. They have an operating system. They have cloud-based services serving government and enterprise. They now need to buy BlackBerry, jettison BlackBerry’s consumer efforts, and focus the purchase on improving Microsoft’s own enterprise efforts. In the right hands and with leadership willing to adapt, BlackBerry could be a formidable force in the market, but the status quo is no longer a viable option,” Lowe concludes.
What can BlackBerry offer Microsoft?
As Lowe mentions, Microsoft already has the software in place, and with its recent acquisition of the device business of Nokia, it also now has the means to produce better products. So what will BlackBerry be able to contribute to Microsoft?
BlackBerry remains as one of the most secured mobile platforms used today. It’s fit for government use, as it has acquired FIPS 140-2 certification even before the BlackBerry 10 platform was released. Microsoft already has a lead in the enterprise, as most companies use the Windows platform for their computers. With Microsoft, BlackBerry can penetrate the mobile enterprise easier and with its offered security, it won’t be long before the enterprise see Windows devices with BlackBerry’s security grow in demand for BYOD.
BlackBerry hopes to infiltrate iOS and Android markets by making BlackBerry Messenger, arguably its most popular consumer application, available on both these rival platforms. Unfortunately plans were delayed due to technical issues with the app, though things are hopefully back on track after the Fairfax deal. If Microsoft acquires BlackBerry instead, it would give them another way to connect users, and more access to that interactive consumer data. BBM is free and convenient to use, not to mention secure.
When Microsoft acquired Nokia’s devices business, the patents weren’t included in the purchase. But the two struck a deal that would allow the software giant to access the patents to use it in its devices for a period of ten years. Which means, Microsoft is still in need of patents.
BlackBerry’s patent portfolio is estimated to amount to well over $2 billion. If Microsoft acquires BlackBerry as a whole, including the patents, it would give them more leverage in device production. The downside is, it could also be used as weapon to start suing anyone and everyone they can (a tactic Microsoft used against Android OEMs), inevitably halting innovation.