Can Lenovo Really Buy Out BlackBerry?
Yasir is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
BlackBerry (NASDAQ: BBRY) is one of the companies making headlines in the tech industry. Once a dominant force in the smartphones market, BlackBerry is slowly trying to get back on the right track after fading away in recent years. Apple's iPhone and all the Android based smartphones knocked out BlackBerry, which led to the company having less than 5% of the market. However, a comeback might be near with BlackBerry's latest smartphone offerings.
BlackBerry's stock rose nearly 8% after the company did fairly well in over 20 countries. Reports suggest that the sales have been good in several markets, with the Z10 expected to hit U.S markets on March 22. Thorsten Heins, BlackBerry's CEO, was impressed with how the smartphone has performed is all markets. He claimed that the reception has been brilliant and the early signs suggest that the Z10 will be successful. Heins also said that both the operating system and the phone have been attracting people using other brands and platforms.
Can Lenovo really buy out BlackBerry?
There has been a lot of speculation that Lenovo (NASDAQOTH: LNVGY.PK) might acquire BlackBerry. Yang Yuanqing, Lenovo's CEO, made a statement that the company is looking for various external growth opportunities, including a buyout of BlackBerry. He claimed that the acquisition could make sense, but the company will need to analyze BlackBerry first. Lenovo already has a history in buying out product lines and other brands, including its successful acquisition of the ThinkPad product line from IBM.
The reason why Lenovo might be considering such a buyout is to boost its entry into the smartphones market. Lenovo does have some Android based offerings; however, there are just too many competitors within the Android smartphones market. An acquisition of BlackBerry could help Lenovo get that market position which the company has always dreamed of. Also, most of Lenovo's total revenue consists of PC sales; a market which is slowly fading away. An entry into the smartphones segment will not only help the company to grow further, but will also help the company to rely less on the PC market, which is declining. Lenovo's ThinkPad acquisition is still seen as a successful deal and the ThinkPad line is one of the reasons why Lenovo has become such a major player in the PC market. Acquiring BlackBerry could help the company to become a major player in the smartphones market and compete against giants like Samsung and Apple.
Even though an acquisition might help Lenovo to expand in several different areas, a buyout won't make sense financially. BlackBerry isn't a small company and has a market cap of $7.8 billion compared to Lenovo's capital of around $11 billion. Also, Lenovo's cash balance of nearly $4 billion will not be able to buy out the entire company along with a premium over market value. However, Lenovo might just buy the software or the hardware and not the entire company. Whatever it is, we'll have to wait and see how BlackBerry performs and whether Lenovo has any true intention of acquiring something from BlackBerry, if not the whole company.
What the future holds for BlackBerry if Lenovo doesn't step in
BlackBerry will not get back on the top overnight and the company has to face some serious hurdles in 2013. Two things will affect BlackBerry's sales, competition and its late entry. The company's late entry into touchscreen smartphones is one of the reasons why BlackBerry has lost so much market share. It could also impact current sales of the BlackBerry Z10 and Q10. Competition is as fierce as ever and some of the struggling players have already stepped up their game, including Sony and Nokia. Therefore, not only does the Z10 face competition from the the iPhone 5 and the upcoming Samsung Galaxy S4, but also from Nokia and Sony's latest offerings.
Even though the company has released a totally new product, compared to its previous product line, the loss of BlackBerry's brand image might finally mark the end of the company, as a whole. If the Z10 and Q10 don't perform well in 2013, it could well be the end of BlackBerry.
BlackBerry's shares have been going up as the company tries to get back its lost brand image. BlackBerry might continue to grow in upcoming months until a true picture of its sales is reported. Even though the reception has been good, we will still need to wait for the Q1 results in order to get a better picture on how well the company has done in 2013. The second quarter will probably be the most important quarter in order to analyze the company's performance in various markets, including the U.S market. BlackBerry still finds itself in a similar position as Nokia as both the companies are trying to get back on top after losing significant market share in recent years. Also, Sony is another player which has stepped up its game in the industry and is determined to get back on top.
Yasir Idrees has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!