Market Overview

How BlackBerry's Decline Could Make It a Better Takeover Target

Research In Motion (NASDAQ: RIMM), which is set to debut the BlackBerry (NASDAQ: BBRY) name and ticker next Monday, is having a rough week. The stock is down again today, hovering between a three and four percent decline after dropping more than eight percent this morning.

Jan Dawson, Ovum's Chief Telecoms Analyst, told Benzinga that the company is on its way to becoming a niche player in the smartphone industry. When asked if that would make BlackBerry a greater takeover target, Dawson replied, "Potentially."

"The question becomes who would buy them and what for," he said. "They have a base of 79 million users. It's unlikely that anybody that would acquire them would be able to keep whatever loyalty they may have to BlackBerry -- if they were re-brand it and try to integrate it into whatever else it is they do."

Dawson said that in addition to BlackBerry's technology (which he referred to as being "decent"), the company has a lot of patents.

"I think in some ways that's actually the more promising acquisition," he said, referring to the patents. "But you'd probably want to wait for a while until they lose more of their user base [and] until the share price comes down so you could snap it up for cheaper and not have to worry about managing the installed base and all the devices that are out there and keeping all of that going."

In discussing the report that Lenovo is interested in acquiring BlackBerry, Dawson noted that the company quickly backtracked on its story. "But some Chinese vendor might want to buy into them," he said. "The problem is that they serve so many government contracts here in the U.S. that any Chinese buyer is likely to be blocked, even though it's a Canadian and not a U.S. company. Essentially, all those government departments that are running off them would immediately shut those off, which would reduce the value significantly."

Could Lenovo -- which used the ThinkPad brand to become the world's second-largest PC manufacturer -- change that?

"Probably not, to be honest," said Dawson. "They've done okay in PCs but PCs is a dying market overall. It's been shrinking for quite some time. It's just not clear to me that they can hold on to a lot of the key customers. A lot of American companies and government agencies use BlackBerry. They're not gonna be comfortable with a Chinese company running the show. That's one of the key challenges that Lenovo or any other Chinese company would have."

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Posted-In: BlackberryAnalyst Color News Rumors M&A Analyst Ratings Tech Trading Ideas Best of Benzinga

 

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