Blackberry Background
Blackberry announced Monday that it will be doing a strategic review due to their current down slide. According to IDC, BlackBerry’s worldwide smartphone market share in the second quarter was 2.9 percent, compared with 4.9 percent during the same period in 2012. Timothy Dattels, a Blackberry board member and a senior partner at TPG capital, one of the worlds largest private equity firms, will head up the review. Dattels stated “Given the importance and strength of our technology, and the evolving industry and competitive landscape, we believe that now is the right time to explore strategic alternatives” (Source, CTV). In April 2013, Thorstein Heins stated “In five years I don’t think there’ll be a reason to have a tablet anymore” which may have been an indicator of Blackberry’s future. On Monday, Heins went on to say “As the special committee focuses on exploring alternatives, we will be continuing with our strategy of reducing cost, driving efficiency and accelerating the deployment of BES 10, as well as driving adoption of BlackBerry 10 smartphones, launching the multi-platform BBM social messaging service, and pursuing mobile computing opportunities by leveraging the secure and reliable BlackBerry Global Data Network” (Source, CTV). Below are a list of potential buyers, please feel free to comment and share.
See Blackberry’s Official Press Release Here
Samsung
Samsung Electronics Co. Ltd. has become one of the most powerful players within the smartphone industry. Samsung and Apple Inc. account for a large majority of the US market. Samsung has achieved strong sales during the summer months, due to the success of their Note, S3 and S4 hardware. Unfortunately, they have yet to develop their own operating system for higher end devices and rely on either Google Android or Windows 8 to power the most popular hardware in North America. This has effected Samsung’s bottom line and has resulted in 50% of total profits, slightly lower than Apple’s 53% share. Apple is able to outperform Samsung due to their strong iOS mobile operating system, which has allowed for monetization of digital content, such as books, apps, games, music and movies. Currently, in order for Samsung to capitalize on the digital content market, they have been reliant on Android and Windows 8, which has resulted in revenue sharing, rather than Samsung monetizing digital content through their own operating system. Therefore, Blackberry would be an interesting acquisition for Samsung, due BBRY’s existing BB10 operating system, patents and loyal enterprise clientele. The enterprise market has been difficult for smartphone manufacturers to penetrate and BBRY’s faithful users could help Samsung obtain a competitive advantage over Apple and Microsoft.
Samsung has been developing its own operating system, called Tizen, but it is unlikely to compete with Apple, Android, Windows 8 and Blackberry. Tizen will be rolled out on some of Samsung’s lower end hardware models and be used as a low cost alternative. Acquiring Blackberry could allow Samsung to create a foundation for an ecosystem that could directly compete with the major players, who specialize in creating mobile operating systems.
Microsoft
Microsoft has a habit of mimicking Google, since the tech giant recently acquired Motorola, Microsoft may follow suit with a takeover of the flagship Canadian technology company. Analysts have suggested that Blackberry’s most valuable assets are in their intellectual property, which includes enterprise mobility software and smartphone patents. Therefore, the firm who is known for their desktop operating systems may bulk up their portfolio, express interest in the IP Blackberry holds and take a risk on the 72 million mobile subscribers BBRY has obtained worldwide. The acquisition would help Microsoft bolster their mobile subscriber base and move closer to Apple and Google by obtaining the market share provided by Blackberry’s existing user base. The speculation is that Blackberry will have to divide its assets, rather than be sold as a single entity. If division of assets occur, look for Microsoft to snap up some of their valuable patents and maybe some hardware assets to boost their product line-up.
ZTE or Huawei
ZTE and Huawai aggressively compete with Blackberry in emerging markets. While Blackberry has experienced some hardships within the last year, emerging markets have been one of the only strong points for the Canadian smartphone manufacturer. ZTE and Huawei are the two largest mobile hardware manufacturers in China and even though they would be a likely buyer, Canadian and US governments may be opposed to a takeover from a dominant Chinese company, due to concerns surrounding security. On October 8th 2012, The House Permanent Select Committee on Intelligence, released a report on both Huawei and ZTE. The report’s executive summary stated
“The Committee’s main goal was to better understand the level of risk posed to the United States as these companies hope to expand in the United States. To evaluate the threat, the investigation involved two distinct yet connected parts: (1) a review of open- source information on the companies’ histories, operations, financial information, and potential ties to the Chinese government or Chinese Communist Party; and (2) a review of classified information, including a review of programs and efforts of the U.S. Intelligence Community” (source: http://intelligence.house.gov/sites/intelligence.house.gov/files/Huawei-ZTE%20Investigative%20Report%20(FINAL).pdf).
If ZTE or Huawei were to acquire Blackberry, it will be very difficult to establish market share, given the alleged security threat from the Chinese hardware providers. Therefore a takeover would most likely be the end of mass market success in North America and Blackberry would be an emerging market cash cow for ZTE or Huawei.