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An offer by Lenovo to buy BlackBerry is again in the news, one year after such a move was previously rumored in November 2013 but was reportedly dashed by Canadian authorities at that time due to security and other concerns.
The latest rumor calls for Lenovo Group, a Chinese company, to make an offer for Canadian-based BlackBerry at $15 per share, according to a report by Benzinga.com, a financial Website. The offer, which was revealed by an unnamed source, could come as early as this week, the story reported.
“The source said Lenovo’s first offer would be $15 per share, with a deal ultimately getting done around $18 per share,” the story stated.
The previous Lenovo attempt to buy BlackBerry in November 2013 was scuttled when the Canadian government made it very clear that no Chinese company would be purchasing BlackBerry, according to an earlier eWEEK story. Lenovo had very seriously pursued a deal at that time, but Canadian regulators said that they “would not approve a Chinese company buying a company deeply tied into Canada’s telecom infrastructure,” according to the earlier report.
In January 2013, Lenovo Chief Financial Officer Wong Wai Ming told Bloomberg that Lenovo is always “looking at all opportunities,” including BlackBerry and others.
In an email reply to an inquiry from eWEEK, a BlackBerry spokesperson said the company “does not comment on rumors or speculation.” Lenovo did not respond to a request for comment.
Charles King, an IT analyst with Pund-IT, said that while the deal is only a rumor so far, it would make sense for Lenovo to continue to pursue BlackBerry.
“Lenovo is obviously an extremely ambitious player, particularly in the mobile space,” said King. “It’s done extremely well in PCs.”
What makes the potential deal even more interesting from a strategic standpoint is that Lenovo bought IBM’s System x server business earlier this year, which adds another key dimension for Lenovo’s existing business lines.
“Adding a known brand like BlackBerry would allow Lenovo to say, ‘We have an end-to-end business solution with products in place’ from the [smartphone] computer in your pocket to the one in your briefcase, to the one on your desktop and in your data center,” said King. “If they can make it work from a regulatory standpoint, I think it’s a viable possibility.”
Lenovo Reportedly Seeking Again to Buy BlackBerry
The previous concerns of the Canadian government and others about security if China-owned Lenovo struck such a deal aren’t necessarily new, said King. “The points about security concerns, that is an issue, but frankly the same issue came up when Lenovo and IBM said they were going to doing the System x deal, and it was resolved successfully by outside auditors.”
That eventual approval for the Lenovo IBM System x deal could “actually serve as a springboard for Lenovo,” he said. The IBM System x unit is a supplier of server systems to the U.S. Department of Defense, so there were military and security concerns about the deal for the technology. Initially, there was resistance to the purchase, but the deal was assessed by federal agencies and was found to be acceptable, according to King.
“Lenovo could argue that that was in effect a seal of approval and could convince Canadian authorities that it is OK,” said King.
In addition, the U.S. government allowed Lenovo to purchase IBM’s PC business back in 2005 for $1.25 billion. That deal was at the time was one of the largest acquisitions ever of a U.S. company by a Chinese company. Today, Lenovo has major sales and research headquarters in North Carolina, and it has completed the construction of a manufacturing facility there.
Another analyst, Dan Maycock of OneAccord Digital, told eWEEK that the only way that such a deal could ultimately gain approval is if Lenovo “finds a way to separate the security issues from the mobility business. Right now they are closely intertwined, but it doesn’t mean they always have to be,” he said.
Without those kinds of changes, Maycock said, “there’s no way on Earth that Canadian regulators will approve the company holistically being sold to Lenovo” because of security worries when it comes to the Chinese government. “I don’t think that Canadian regulators trust Chinese owners essentially” due to the use of BlackBerry products by government and military agencies around the world, he said.
“But I’m not saying it’s impossible,” said Maycock. “The security components would have to go somewhere else. I don’t think they would transfer the whole company. That’s not going to happen.”
Smartphone maker BlackBerry has been a target for Lenovo because by acquiring the company, Lenovo would pick up yet another large potential market for additional sales. BlackBerry’s fall from dominating the enterprise smartphone market has been swift and stunning. BlackBerry spent much of 2012 and 2013 trying to shake off the image that it was finished, especially compared with its presence five years earlier when its devices were the “enterprise gold standard” for mobile business communications. In early 2006, half of all smartphones sold were BlackBerry models. By 2009, though, its share of the global smartphone market was down to 20 percent.
In September, BlackBerry’s latest Passport smartphones sold out within 6 hours after their announcement on BlackBerry’s own Website and within 10 hours on Amazon.com after they went on sale in September, according to an earlier eWEEK report. That successful preorder news for the Passport phones was a positive sign for BlackBerry, which also announced on Sept. 26 that its revenue dropped to $916 million in the second quarter of fiscal 2015, down from $966 million in the first quarter. The company also posted a GAAP net loss of $207 million for the second quarter, which ended Aug. 30, compared with a $965 million loss in the same quarter of 2013, according to a financial statement released by BlackBerry on Sept. 26. Those figures compare to a modest net profit of $23 million earned in the first fiscal quarter of 2015, which ended May 31.
The new BlackBerry Passport smartphones for enterprise users sell for $599 and include a full HD display that is 4.5 inches square, which will allow 60 characters to be typed across its screen, compared with about 40 for a typical smartphone, according to BlackBerry.