The No. 1 Reason For Apple To Acquire BlackBerry
There's a new rumor claiming that Apple Inc. (NASDAQ: AAPL) might be interested in acquiring BlackBerry Ltd (NASDAQ: BBRY). The off-the-wall deal is likely rooted in the belief that BlackBerry's security services could be worth billions of dollars.
Even then, investors might wonder about the validity of this rumor. Why would Apple, the most valuable company in the world, pay $5 billion for BlackBerry?
Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, has one theory. He said that, in most scenarios, the Department of Justice and other government organizations would prevent Apple from acquiring BlackBerry due to monopoly laws. That could change if the world's largest governments started to fear that BlackBerry may not be around in five or 10 years.
At the very least, they may worry that the company will not be able to fulfill its obligation to protect the mobile devices used be these governments.
"If that were to happen, there would be no DOJ [or] EU issues," Udall told Benzinga. "The one way this deal might work is if the U.S. governments [and others] basically want Apple to buy them because they're worried that BlackBerry, effectively, won't be around in its current form."
On the downside, this could lead to a bidding war -- especially if Apple can acquire the company at a fair price. Udall said a "good deal" would be $15 a share, but that could attract the attention of Microsoft Corporation (NASDAQ: MSFT) and Amazon.com, Inc. (NASDAQ: AMZN), among others.
"The two companies that should have already bought BlackBerry are Google and Microsoft," said Udall. "They could make it work and that would basically satisfy [the issues]."
If Apple is ever (as Udall put it) "cajoled" into buying BlackBerry and a bidding war occurred, Udall thinks Apple might happily walk away and let the others take over -- even if the world's largest governments wanted Apple to stay in the race. In other words, Apple's only reason for buying BlackBerry would be to appease world leaders. Alternatively, Udall said there is always the possibility that Apple will acquire a piece of BlackBerry, such as its Network Operations Center.
"Maybe Apple doesn't buy anything else but they do effectively buy and take over [NOC]," Udall concluded.
BlackBerry spiked sharply when the unconfirmed rumor hit on Monday morning. Shares traded recently at $10.20, up 3.3 percent on the day.
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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