that Lenovo is interested in buying BlackBerry.
What BlackBerry Brings To The Table
Other than its powerful brand, BlackBerry would be coveted by Lenovo for the following reasons:
Best-In-Class Security
There appears to be three things that differentiate companies in the handset market - price, a strong ecosystem and security. Lenovo and Xiaomi appear to be winning the price wars on the low-end of the marketplace, at least in China. Apple has the strongest ecosystem on the market. Getting handsets to connect with iPads, or computers creates ease of use - Apple's loyal customer base is addicted to it. That said, as the Internet-of-Things becomes more powerful, for the first time a secure network is becoming paramount in consumers' minds. BlackBerry's best-in-class security will help keep its handsets from becoming commoditized.
Window Into The Enterprise
BlackBerry's security is already valued by corporations and governments who need to share confidential information over secure networks. Mobile device management for companies that allow employees to connect to corporate emails, and access confidential information via their personal cell phones is a growing business as well. The sale of smartphones to consumers is highly competitive; tech giants now see enterprise solutions as virgin territory. Apple and IBM (NYSE:IBM) have formed an alliance to revolutionize enterprise solutions and Samsung, with its 360 Services, plans to offer mobile device management as well. BlackBerry is already an established leader in this coveted space.
What Lenovo Brings To The Table
Deep Pockets
Lenovo could offer BlackBerry a deep pocketed investor to help grow its business - not that BlackBerry needs it. The company has about $3 billion in cash and securities. If not an acquirer, Lenovo could become a strategic partner if BlackBerry needed capital in the future.
Window Into China
China is the world's largest smartphone market with about 283 million units sold - almost three times the size of the U.S. market. Lenovo currently has about 12% marketshare in China - a market BlackBerry covets. Asia/Pacific represents about 16% of BlackBerry's sales and CEO John Chen would like to increase that. An acquisition by or partnering arrangement with Lenovo could help BlackBerry improve handset sales to the Chinese marketplace instantly.
Conclusion
Rumors that Lenovo is interested in buying BlackBerry are not surprising. Given its vaunted security and enterprise mobility expertise, BlackBerry could be a prized takeover target for several companies. The $15 - $18 per share price target appears too low and the timing leaves a lot to be desired. With a return to profitability, in a few quarters BlackBerry could demand multiples of the rumored buyout price. I would invest in BlackBerry based on its earnings potential and ignore buyout rumors.
Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.
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