BlackBerry (BBRY) is in desperate straits. There have been rumors going around that Google (GOOG) would be interested in buying BlackBerry. We believe Google likely is not interested in BlackBerry for a number of strategic, and technological reasons. The patent portfolio of BlackBerry we believe is overpriced and real numbers of what it would go for are much lower than most expect.
We do not believe BlackBerry patents are as valuable as some claim due to a report by patent valuation expert Florian Mueller:
"BlackBerry never went out to sue someone," Mr. Mueller said. "This portfolio is untested in litigation."
The fact is that most BlackBerry patents have been used for defensive, not offensive purposes so a buyer looking to profit from patents may not be able to leverage them.
BlackBerry will likely be sold off in scraps on the cheap:
"Michael Lazaridis, the co-founder of BlackBerry who severed all corporate ties with the company this past March, has expressed concern about the company being torn apart. "It's really hurting me," he told The Globe and Mail. "Everyone is talking about the most likely scenario being that it will be broken up and sold off for parts."
"It may seem like a distant memory now, but just a few years ago BlackBerry was the premier mobile gadget on the market. The device was so ubiquitous on Wall Street and Capitol Hill that it earned the nickname CrackBerry. As recently as 2009, BlackBerry was named by Fortune magazine as the fastest growing company in the world, with earnings exploding by 84% a year. Times have changed. Since 2009, BlackBerry's stock price has collapsed by a vertigo-inducing 90% to under $7 at its low point last summer.
Today, BlackBerry has fallen to the back of the smartphone pack - with a minuscule 3% of the market - as Apple's iPhone and Google's Android operating system have come to dominate the market. BlackBerry's decline has become a case study about what happens when a tech giant fails to innovate in a consumer-technology market evolving at breakneck speed. In a sign of the times, Apple said on Monday it sold a record 9 million units of its latest iPhone devices during the first weekend they were on sale."
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BlackBerry has tried in the past to allow Android on their devices, but it failed:
"In a conference call this morning, the new CEO of RIM, Thorsten Heins, announced that BlackBerry 10 smartphones will have an Android player, allowing them to run third-party software created for this rival platform.
Heins, who took over for former co-CEOs Jim Balsillie and Mike Lazardis this weekend, made it evident that BlackBerry 10 phones will have the opportunity to contain more third-party applications -- the company has been heavily criticized in the past for the limited supply of these."
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Google is actively recruiting talent regardless in the HQ Area of BlackBerry (Waterloo, Ontario):
"Motorola Mobility said on Thursday it plans to set up a new hub in Waterloo, located about an hour's drive west of Toronto.
We have a small space right now and we're looking to grow considerably, said Derek Phillips,engineering director for Motorola Canada. He declined to specify the number of new hires expected, but said the company was seeking computer science and engineering talent. Google acquired Motorola Mobility last year in a $12.5 billion deal that gave it ownership of a large portfolio of communications patents. It has since moved to revamp the company's money-losing mobile phone business."
Now what gets thrown a lot in regards to BlackBerry is the huge value of their patents. We respectfully disagree:
"But not all BlackBerry's patents are as valuable as they used to be. For example, the company's group of patents related to physical keyboards may have been hugely valuable six years ago, when such devices were the industry norm. In recent years, as most consumers have opted for touchscreen devices, the patents may have become much less useful to other manufacturers.
In a sum-of-the-parts valuation, senior Bernstein Research analyst Pierre Ferragu estimates the value of BlackBerry's portfolio at between $800-million and $1.5-billion, depending on how many of the patents relate to previous generations of wireless technology. For many analysts, who often attribute zero value to some other parts of BlackBerry's business, patents represent the most lucrative portion of the company.
Ultimately, the value of the patent portfolio will be determined only by what a potential buyer is willing to pay - and, so far, there has been little interest from the same companies who clamoured for a piece of Nortel's arsenal just two years ago."
In conclusion, we believe Google is only officially looking at BlackBerry to gain trade secrets on how to improve operations of their Android empire. We would not recommend buying BlackBerry shares in anticipation of some hug bid coming out that is not likely to occur for the reasons mentioned above.