BlackBerry Could Still Get Snapped Up

 | Sep 07, 2013 | 10:00 PM EDT
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The knee-jerk response to Microsoft (MSFT) buying Nokia (NOK) was a selloff in BlackBerry (BBRY).

On Tuesday, many commentators were saying last rites for BlackBerry, as its most likely buyer seemed to have taken a pass on it in favor of Nokia.

But within 24 hours, this sentiment seemed to shift. A Bloomberg article quoted inside sources at Microsoft who suggested that the company was still keeping a close eye on BlackBerry. The stock of BlackBerry bounced on Wednesday and Thursday in response to this idea that Microsoft could still be interested in the mobile email pioneer.

Also, The Wall Street Journal said this week that BlackBerry would like to wrap up an auction process by the end of November. The company claims that several parties have expressed interest.

To be clear, I believe that there is a good chance someone will buy BlackBerry, in whole or in part. However, I believe you should pause before jumping into the stock.

First, let's discuss why Microsoft or someone else might want to buy BlackBerry, despite all of that company's turmoil in the past couple of years.

• The mobile Internet is still where it's at. If you are not in the space already -- like IBM (IBM) -- BlackBerry gives you a ticket to the game. If you are already in the game but struggling to improve your positioning -- like Microsoft -- BlackBerry can potentially help with that.

• BlackBerry owns lots of mobile patents, probably at least $2 billion worth of solid patents in its portfolio, coming from Nortel and Ericsson. For a player such as Microsoft, these could be helpful in making the Android community pay up.

• Since BlackBerry is a non-U.S. company, Microsoft, IBM or Cisco Systems (CSCO) could use its foreign cash to do the acquisition.

• The Canadian government would rather see a U.S. buyer of BlackBerry than see the whole company go down the tubes. I think it's highly unlikely that an Asian company such as Lenovo, HTC or Huawei will buy BlackBerry. The Canadian and U.S. governments would never approve of Chinese access to their potentially classified data. But a U.S. buyer would be welcomed at this point on the company's current trajectory.

• BlackBerry still has 70 million subscribers, and a company such as Microsoft would hope it could move those people to its own phones. The security network is a potential asset that Microsoft could use, as well, to win enterprise and government business.

• There's the whole futuristic "Internet of things" vision for BlackBerry. This comes from the acquisition it did for the software that became the basis of the BB10 operating system. It hasn't been translated into a real business yet, but the potential is there -- and this is where the world is moving.

• The other angle here is that if Nokia chief Stephen Elop is going to take over as CEO of Microsoft (which seems likely), then Microsoft is clearly not turning its back on devices. Elop was born in Hamilton, Ontario, and for a time he owned a home in Waterloo, the headquarters of BlackBerry. He likely would have a soft spot for the company and its assets.

However, before everyone gets too excited about a big premium buyout for BlackBerry, it's important to keep some things in mind:

• BlackBerry's next earnings report is due at the end of the month. Its last earnings report on the last day of June was an utter disaster. A few weeks after that report, the company essentially put itself up for sale. That strongly suggests the present quarter is even worse than last quarter. Additionally, it wants to wrap up the sale of the company by November. Why? Because it can probably see clearly that the company is slipping away. This month's earnings will likely land with a thud, and the stock is likely to respond accordingly.

• The potential Chinese buyers are not really potential buyers. The governments won't allow it. Therefore, there's not as much of an auction as some people believe there might be.

• There's no reason that any potential buyer must buy all of BlackBerry. A buyer might want only a portion of the company.

• There's a long time between now and November. Why rush to buy the company now rather than in, say, October, after the bad earnings?

• Many skeptics would also say any buyer could have bought this company at any time in the last two years, and no one has. So why would they do so now?

In the end, I believe BlackBerry will get bought. But I'd rather wait until October before I'd own these shares.



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