Why a BlackBerry Ltd acquisition by Samsung could make sense

SEOUL/TORONTO — Samsung and BlackBerry have splashed frigid water on a report that Samsung wants to make a US$7.5 billion takeover offer for the struggling Canadian device maker. That, however, did not stop tech industry watchers from dissecting all the possibilities.[np_storybar title=”‘I’ll believe it when I see it’: BlackBerry, Samsung deny they are in talks about $7.5-billion deal” link=”https://business.financialpost.com/2015/01/14/blackberry-ltd-gets-takeover-offer-from-samsung-worth-us7-5-billion-source/”%5D BlackBerry Ltd. vigorously denied a report Wednesday that it was in talks with Samsung Electronics Co. Ltd. about a possible takeover, with the contradictory claims sending the Waterloo, Ont.,-based company’s shares soaring, then falling [/np_storybar]BlackBerry shares have given back a little over half of the spectacular gains that they made late Wednesday after the Reuters report. Late Wednesday morning, BlackBerry was down $2.51 or 16.7% to $12.51 on the TSX after jumping 30% after the Reuters report was published.Once strong in mobile devices, BlackBerry is now an also ran, overtaken by the touchscreen offerings of Apple and Samsung. But analysts say it has technology and intellectual property that could make it attractive to Samsung, which is looking to revive growth momentum as it smartphone business falters.BUSINESS MARKETDespite its plunging share of the overall smartphone market, BlackBerry still has a strong presence in the business market that Samsung is trying to crack.Analysts say that business clients are increasingly important for the Korean company’s future. Its motivation to get more corporate clients is greater nowadays because intense competition in the consumer mobile market has reduced its fat profit margins.“What Samsung needs is credibility in the business space, which is what BlackBerry is pivoting towards at this point,” said Carmi Levy, analyst and writer at Voices.com, a London, Ont.-based web technology company.“There’s a lot of complementary benefits for both of these companies to get together.”Samsung has software called KNOX for security-conscious business customers but the corporate world has not embraced this new product. By contrast, the software behind the security for BlackBerry devices is well regarded and popular.One drawback of KNOX for Samsung is that it is based on Google’s Android operating system, which the South Korean company is trying to reduce its reliance on. This week, it launched a cheap smartphone that runs on its own operating system Tizen.NOT ANDROIDSamsung wants full control over all aspects of its products, not just their hardware but their software as well, like Apple and Google do.But relying on Google’s Android limits what Samsung can do with its mobile software and hence, Samsung built its own mobile operating system Tizen.Acquiring BlackBerry would give Samsung more scope to work independently from Google. BlackBerry’s security software for business customers runs on its own platform.“It is likely that KNOX, Samsung’s security platform for business clients, will have a synergy effect” with BlackBerry, Yoo Eui-hyung, an analyst at Dongbu Securities, said in a report.BlackBerry’s stock of other patents and intellectual property could also be attractive to Samsung.BlackBerry responded late Wednesday that it has not engaged in discussions with Samsung Electronics Co. Ltd. about a possible takeover and Samsung sent an email saying the report was “groundless.”Reuters said Samsung had met with BlackBerry executives over the possibility of buying the Canadian company for as much as US$7.5 billion. The news agency cited both a source familiar with the proposal and related documents.The two companies are rivals in the smartphone business but have worked together on technology.BlackBerry and Samsung announced a partnership last November where the Waterloo, Ont.,-based company made its mobile security technology available for the Android operating system that is used in many of Samsung’s smartphones.For BlackBerry, the arrangement gave their software the ability to work on Samsung’s Galaxy and Note smartphones, while it provided Samsung an opportunity to get the attention of business customers that BlackBerry courts.BlackBerry has been in the crosshairs of interested buyers in the past. Last fall, Chinese company Lenovo was considered a potential bidder though an offer never materialized. Any takeover of BlackBerry would require Canadian government approval and there was speculation that a Lenovo takeover of Canada’s premier technology company wouldn’t be acceptable.BlackBerry Ltd mobile security tie-up with Samsung Electronics Co ‘tip of the iceberg,’ John Chen saysBlackBerry Ltd reveals Passport with rounded corners but only one wireless provider in the world is carrying itBlackBerry Ltd unveils Internet of Things platform that connects with cars, ships at CES 2015Chief executive officer John Chen has said he is focused on turning around operations at the company rather than hunting for buyers. Chen was hired in late 2013 after the BlackBerry board conducted an extensive review of strategic options, including discussions with possible buyers for the Waterloo, Ont.-based company.Traders reacted to the Reuters report by sending BlackBerry’s stock to its highest level since early 2012 on the Toronto Stock Exchange. Despite the runup, BlackBerry’s current value remains far below the peak when it was the world’s leading smartphone company, prior to the emergence of rival products such as the Apple iPhone, Samsung Galaxy and others.According to the disputed Reuters report, Samsung had proposed a range of US$13.35 to US$15.49 per share in its initial approach to BlackBerry. The offer would be a premium of 38 to 60% over BlackBerry’s stock price before the report emerged.Compiled with files from The Canadian Press, The Associated Press

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Why a BlackBerry Ltd acquisition by Samsung could make sense