A recent Reuters report stated that a few technology firms, including Google Inc. (GOOG), CiscoSystems Inc. (CSCO - Analyst Report) and SAP A.G. (SAP - Analyst Report), are in talks to buy the beleaguered BlackBerry handset manufacturer, BlackBerry Ltd. (BBRY - Analyst Report). However, none of these companies have confirmed the news.
According to an anonymous source, a few days back BlackBerry had explored a strategic option to convert the company into a private entity. Its largest shareholder, Fairfax Financial Holdings, was the prospective buyer, offering a $4.7 billion bid for the company. Reuters also stated that a few private-equity firms have expressed an interest in theadditional financial details about BlackBerry’s various business segments. However, currently BlackBerry is focused on taking bids from industry peers.
BlackBerry is facing ever-increasing competition in the smartphone market, especially with a stagnant product portfolio and an unfavorable product mix. The launch of Apple Inc.’s (AAPL - Analyst Report) iPhone was a big blow to the company.
The situation further worsened after Google launched the Android operating system which was adopted byseveral smartphone manufacturers. Currently, BlackBerry’s operating system is inthe fourth position after iOS, Android and Microsoft Corp.’s (MSFT - Analyst Report) Windows Phone software.
In the last three years, BlackBerry has been striving to regain its lost glory in the market. The company has failed to keep up with the next-generation market trend, which keeps changing with respect to technology, price and data plan, provided by the wireless carriers. At this juncture, the company’s decision to divest itself entirely or go private may give BlackBerry’s management an opportunity to resolve many critical issues.
Given the level of uncertainty around BlackBerry’s business, it is unclear how serious Google or other tech companies are about buying the company. However, BlackBerry has a strong balance sheet coupled with its rich patent portfolio, which covers a broad area of mobile security to push e-mail system for the high-end smartphones. Its patents are estimated to be worth $2 billion to$3 billion.
So, a potential decision to acquire BlackBerry by any technology company could be seen as a shoring up of their patent portfolio, though doubts about the assets' value remain an issue, according to Reuters.
Google, Cisco and SAP currently carry a Zacks Rank #3 (Hold).