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BlackBerry (BBRY) Shares Up on Rumors of Buyout by Apple - Analyst Blog

Zacks Equity Research

Shares of Canadian handset manufacturer BlackBerry Limited BBRY jumped nearly 6% in yesterday’s trading session, following rumors that it might be acquired by rival Apple Inc. AAPL.

In January this year, a similar rumor of BlackBerry getting acquired by Samsung had driven up the company’s shares by around 30% in a day. But the trend reversed when BlackBerry declared that the rumors were baseless.

While the current rumors have not yet been confirmed or negated by either BlackBerry or Apple, we are still speculating on the possibility of a merger.

BlackBerry has been struggling to survive ever since Apple’s iPhone and Google Inc.’s GOOG Android hit the market. According to a report by IDC, in 2014 itself, BlackBerry’s market share declined around 69.8% from 2013 levels, while Apple’s iOS and Android saw a respective 25.6% and 32% surge in market share.  

BlackBerry has been planning to turn around its business by venturing into other crucial domains like the Internet of Things (IoT). The company’s novel phones like BlackBerry Passport and Classic are also performing well.

Last week, the company made a number of announcements regarding its growth plans. The company introduced its lower priced all-touch handset, BlackBerryLeap, an all-touch smartphone for the Canadian market. The company also renegotiated its partnership with the U.S.-based T-Mobile to make BlackBerry Classic available on the latter’s network. This move is likely to make the handset available for as many as 57 million users. BlackBerry also completed the acquisition of WatchDox, a data security company specializing in providing secure enterprise file-sync-and-share (EFSS) solutions.

Additionally, BlackBerry has a very powerful patent portfolio consisting of about 44,000 patents worldwide in the areas of data security and basic wireless technologies. The company’s prime intellectual properties such as predictive typing on a keyboard or setting up meeting schedules are highly recognized intangible assets for a mobile handset developer.

Apple has had tremendous success in the consumer segment and it has tied with IBM to build share in the enterprise segment. Apple’s product quality and IBM customization is likely to help it penetrate IBM’s customer base, or at least that is the idea. Despite its shrinking market share, Blackberry still has some loyal users and its technology is still valuable, particularly for enterprises. The huge portfolio of patents is also a positive.

Apple is fighting a number of patent lawsuits regarding several of its mobile and tablet products. Recently, Ericsson ERIC, a leading communications and technology firm filed a lawsuit against Apple over the global licensing agreement between the two entities in Germany, the United Kingdom and the Netherlands. Earlier this year, the global giants were involved in a dispute over licensing patents on 2G and 4G LTE technologies in Texas, U.S. It is true that Apple could benefit from Blackberry’s patents.

But when all is said and done, acquiring patents and smaller players is just not the way Apple does business. Also, while it does have a boatload of cash, it has never shown enthusiasm to part with any of it.

At present, Apple carries a Zacks Rank #2 (Buy), while BlackBerry has a Zacks Rank #3 (Hold).


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