From the time when BlackBerry (BBRY) declared that the company was evaluating strategic options, which included selling the company, there have been rumors suggesting that companies like Google (NASDAQ:GOOG), Cisco (NASDAQ:CSCO), and SAP (NYSE:SAP) are interested in buying the company. Of course, there are many different ways things can pan out, but since the company has been struggling, let's assume someone does buy BlackBerry. Since Cisco and BlackBerry are both intensely involved in the enterprise space with a strong focus on infrastructure, let's assume that it'll be Cisco, which wins the battle. So, let's analyze the outcome and take a look at how this acquisition will pan out.
Can Cisco buy BlackBerry?
With a market cap of roughly $124 billion and $34 billion in net cash on the balance sheet, Cisco can definitely afford to buy BlackBerry. Therefore, the financial aspect will not get in the way if Cisco wants to buy BlackBerry. Also, Cisco has a history of acquiring companies and has acquired over 140 companies by now; therefore, the company won't back down from this acquisition and will lock horns against Google and SAP.
This deal can potentially be the largest acquisition in Cisco's history, ahead of the $6.9 billion acquisition of Scientific Atlanta back in 2005.
Why would Cisco be motivated to buy BlackBerry?
Last year, Cisco showed strong interest in making a move into devices with the Cius tablet. However, the company didn't make a move into the more prominent smart devices market and restricted itself to enterprise sales instead. The company killed off Cius in less than a year, directly blaming customers' affinity towards bring-your-own-device [BYOD].
BlackBerry has been shrewd in its initiatives to adapt to this trend as the company has been expanding its management solutions, making it compatible with rival platforms. Despite the fact that BlackBerry will enable Cisco to swiftly move into the smartphone market, it'll also be sufficiently flexible to support numerous platforms.
Bearing in mind that BlackBerry is well established in the corporate atmosphere, it'll be good for the company to re-shape its consumer business and concentrate on offering specialized solutions for the corporate world.
Cisco is also a part of the wireless services industry and the company might see BlackBerry as a part of its mobility solutions business. With the acquisition of BlackBerry, Cisco can make devices, which are completely compatible with the networks running on its hardware.
Advantages and disadvantages of this deal
Apart from the aforementioned advantages, there are a few other benefits of this deal.
- BlackBerry's non-smart devices business could supplement Cisco's existing business.
- The deal will give Cisco a competitive advantage over its peers and revive BlackBerry's business.
- The deal will enable Cisco to make a move into the smart devices market.
On the flipside, this deal isn't an ideal win-win situation and can have a negative impact on BlackBerry's existing business.
- The deal may restrict BlackBerry to the enterprise sphere.
- Cisco may decide to shut-down BlackBerry's smart devices business if the company is only interested in BlackBerry's server and infrastructure workings.
Is this acquisition likely to happen?
Despite the synergies between the existing business of both the companies, Cisco may be a little reluctant to expand its horizon and move into the smart devices market following the failure of the company's Cius and Flip. The profitability of BlackBerry's smart devices business is dubious for many possible buyers, but the company's widespread business outside smart devices may expand Cisco's present business and therefore, it's likely that Cisco might give BlackBerry a serious thought.
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.