Since the talk of the town is the ongoing question of if and who might buy BlackBerry (BBRY), I decided to give you my piece of my mind, since I see many commentators claiming that if BlackBerry would be bought out, it would not be worth much. I beg to differ and in fact I think most people don't understand the dynamics involved. As such, I think BlackBerry might be worth a whole lot more than most people think.
What are BlackBerry's patents worth?
According to Chris Marlett, CEO of MDB Capital Group, BlackBerry currently has 5,236 active U.S. patents and about 3,730 active applications in the wireless communications space. Some people might say so what? Well please recall that Nortel's patent portfolio of more than 6,000 wireless patents sold for $4.5 billion in 2011. Also remember that Google (GOOG) spent $12.5 billion to buy Motorola, citing the company's patent portfolio. So BlackBerry's patents alone might be worth the company's current market cap. In money terms, that means about $4-$5 billion.
What is the business and ecosystem worth?
Then we have the issue of what the business is worth. But anyone who buys BlackBerry will not simply be buying a business, but will also be buying an ecosystem. Remember Motorola did not have an ecosystem, but was a simple business. What might the BlackBerry ecosystem be worth?
Well if we take Microsoft (MSFT) as a proxy, one can spend a whole lot of money and really accomplish nothing. Since the first quarter of 2005, Microsoft's online division (that includes Bing, MSN, and other assets) has lost $10.9 billion trying to compete with Google and has very little (if nothing) to show for it.
And no one really knows how much money Microsoft has spent trying (unsuccessfully so far) to establish WP8 as an Android and Apple (AAPL) iOS alternative. And judging from the fact that Nokia (NOK) is essentially the only WP8 device maker, that Microsoft's tablet strategy has essentially flopped, and that everyone is making money in the devices space except Microsoft, a full fledged and established ecosystem costs a lot of money.
I am sure that Samsung (GM:SSNLF) would give an arm and a leg to be able to have its own fully fledged ecosystem. Like I have said before, it knows that eventually it will have to give up Android, because Google will eventually be a direct competitor. While I do not foresee Samsung putting in a bid for BlackBerry, I simply want to point out that an independent (and established) ecosystem is not an easy thing to come by these days. How many companies out there that are for sale come with an ecosystem?
Investor Robin Chan (who tried once before to buy BlackBerry) said that needed software and security tools to adapt to the influx of employees carrying their own personal mobile devices at work is big business these days. He thinks BlackBerry's network services business alone might be worth $13 per share. You know something, I think he's right. And the simple fact that BlackBerry is essentially the only ecosystem to date with the seal of approval of the U.S. DoD, is worth a lot of money alone.
What is BBM worth?
While BBM is not as popular as Skype or many other communication applications, for practical reasons it's a whole lot better. Please recall that Microsoft paid $8.5 billion for Skype, and to date has not made a dime. And Skype doesn't even come close to BBM's capabilities, and neither do other communication applications. And if you don't know what BBM is (and chances are that you don't know), have a look at this video here. While I am not saying that BBM is worth $8.5 billion (and neither is Skype today for that matter), I am saying that BBM is worth something, especially in the hands of a company like IBM, Samsung or even Microsoft itself.
What is BlackBerry worth altogether?
Please note that BlackBerry's final price (assuming someone makes a bid), is a function of who the bidder is. For example, assuming that some Canadian retirement fund makes on offer, the price will not be the same as that of a public company. The reason is that a public company values BlackBerry in terms of synergy, patents, ecosystem, BBM and a whole lot of other factors that will add value to the company itself over the long term. A hedge fund or a retirement fund simply looks at numbers and the balance sheet and nothing else. So the final price for BlackBerry, will be a function of the interested bidders.
What would BlackBerry be worth to the Chinese? Is there anyone who does not think that Lenovo and possibly Huawei would not pay through the nose to buy BlackBerry to obtain their own ecosystem? I think they would, if the Canadians would only let them. We do know that Lenovo has expressed an interest in BlackBerry in the past (and Nokia also). In fact, Lenovo refused to comment on its intention to put a bid in for BlackBerry, saying simply it doesn't comment on such matters.
Microsoft has always been mentioned as possible suitor in the past. In fact Microsoft and BlackBerry in many ways make a perfect match. BlackBerry's enterprise-focused culture will fit in very well within Microsoft. Microsoft has always found ways to make enterprise customers pay top dollar for value-added services. I think it will find many ways to make enterprise customers pay for BBM and many other types of services, such as MDM. Please recall Microsoft also has its own MDM offering (as does everyone these days), but it is BlackBerry that is the MDM elephant in the room.
IBM is also another great candidate for BlackBerry. In fact if I were to place a bet, I think IBM is making all sorts of assumptions of how BlackBerry would fit in as I write this article. IBM is probably one of the few very large companies that has no device strategy whatsoever. Given the fact that mainframes are going out of style these days (in favor of cloud computing), and also given that IBM has lost the cloud computing race to a whole host of competitors that took the market under its nose, buying BlackBerry might be its only chance to develop a long term devices and smartphone strategy. As with Microsoft, I think BlackBerry's enterprise culture would also blend in very well with IBM.
Putting all together
So let's see now, if we add it all up, BlackBerry is really worth about $4 billion for the patents, about $5 billion for the ecosystem, about $3 billion for the cash, and an additional $3 billion for BBM, QNX and assorted other assets too many to mention.
I think that $15 billion is not a lot of money to pay these days for BlackBerry. Especially if a bid comes from competitors like Samsung, Lenovo, IBM or Microsoft, which in addition to the fact that they all have a mountain of cash, they could very easily pay for BlackBerry with their own stock and not even think about it.
So if we do the math, $15 billion in terms of the stock price comes out to about $30 a share. In my opinion, with the exception of a Canadian retirement fund putting in a bid for BlackBerry, any bid from a major competitor the likes of Samsung, IBM, Microsoft or Lenovo -- or any other big fat market cap company for that matter -- for less than $30 a share (in cash or stock) would be a steal.
Will BlackBerry get such an offer? I really don't know, but if it doesn't, companies like IBM will probably miss their last chance at getting in the devices business, similar to the way Apple lost out on buying Twitter a while ago, and has probably regretted It ever since.