Facebook's Interest In BlackBerry Is Surprising, But Logical

Oct.30.13 | About: BlackBerry Ltd. (BBRY)

Another day, another leak in the press about potential BlackBerry (NASDAQ:BBRY) bidders. The latest one is the strangest one yet.

According to a story in the Wall Street Journal, BlackBerry executives flew to California to meet with Facebook (NASDAQ:FB) last week to gauge its interest in a potential bid.

It is not clear if Facebook actually wants to make a bid for BlackBerry, or if it's just kicking the tires and checking out the paint-job. Irrespective however, the fact of the matter is that executives from both companies did meet, so we have to assume that Facebook is interested in some way.

The question however is, why is Facebook interested?

Well, Google (NASDAQ:GOOG) did the same thing when it bought Motorola for $12 billion. Google, like Facebook, was a pure internet company when it decided to become a gadget maker also. Granted, Google's interest in becoming a smartphone manufacturer also had a lot to do with Motorola's patents, but nevertheless Google's strategy in the will prove to be sound, even if to date there has been a lot of criticism of the Motorola acquisition.

One other reason might be simply that we live in the age of gadgets. It might just be that Facebook's management thinks it has to join the ranks of the many other companies making smartphones and gadgets. Because the reality is that a smartphone today is more than just a device to make calls. Smartphones are communications devices and are being integrated in our lives faster and in more ways than we imagined several years ago.

Smartphones are here to stay and over the long term, developing a devices strategy is definitely a step in the right direction for any company, especially for Facebook, since smartphones are absolutely integrated to the internet anyway.

Also, it might be possible that Facebook wants to buy BlackBerry in order to develop an app that offers a better Facebook experience on BlackBerry mobile devices than anything available on other devices. Many BlackBerry MDM features are exclusive to BlackBerry devices. It might just be that Facebook has some good ideas on how to make people buy more BlackBerry devices.

Also, it is not written anywhere that one company cannot buy some other company with a totally different business model. Perhaps Facebook has some very interesting ideas on how to leverage the BlackBerry brand and integrate it with Facebook.

Either way, the mere fact that Facebook's management met with BlackBerry is further testimony that there is a lot more interest in BlackBerry than initially expected by many people.

Facebook has over $10 billion in liquid assets on its balance sheet, so it can pay for BlackBerry in cash if it decides to make a bid, although I think they will probably pay in stock. As far as the issue of financing is concerned, if Facebook decides to make a bid, it will not be an issue.

Although I was surprised that Facebook might actually be interested in BlackBerry, a marriage between the two companies - no matter how strange - does makes sense.

There are not that many device and gadget companies out there if someone like Facebook would like to get in the business. And like I said, devices should be a long-term strategy of any company, especially for a company like Facebook that is a 100% internet company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.