BlackBerry (BBRY) Might Be One Smart Buy for Facebook (FB), Here's Why...
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Knee-jerk reaction might be negative, but a deal between Facebook (Nasdaq: FB) and BlackBerry (Nasdaq: BBRY) might be a positive for long-term investors.
The WSJ reported Tuesday afternoon that Facebook and BlackBerry might have met recently to discuss a potential deal. BlackBerry executives flew to California to gauge interest from Facebook, though no speculation as to how the meeting went was made.
While market watchers might hate the idea of Facebook buying BlackBerry, it wouldn't be that bad. Here's a few reasons:
* Current valuation pegs BlackBerry being taken over for around $4.7 billion. Not a small sum, but Facebook could foot the bill in maybe a stock-and-debt deal given its $122 billion market cap.
* BlackBerry will get a $500 million tax refund sometime around August 2014 which would cut the price even more.
* BlackBerry has zero debt. That means all of its $2.3 billion to $2.5 billion in cash and equivalents would also trim the risk.
* Analysts generally have BlackBerry's handset unit with a zero valuation on it, so that would be shut or Facebook would immediately jump into the handset business with little initial cost.
* BlackBerry has a robust patent portfolio that analysts say could be worth $1 billion to $3 billion. That would be a licensing opportunity for Facebook.
* BlackBerry Messenger (BBM) is the biggest thing Facebook needs right now. Facebook hasn't gotten real traction with its Facebook Home initiative for Google (Nasdaq: GOOG) Android, but BlackBerry just said earlier today that its BBM app for Apple (Nasdaq: AAPL) iOS and Google Android hit 20 million downloads within the first week. There's no question that Facebook would love more exposure in mobile any way it can get it (just about half of active users accessing Facebook via a handset monthly). The dedicated BBM user base would be a perfect fit for Facebook, not to mention that the technology behind BBM is already tried and true. More investment would only bolster what is already in place.
* Finally, integrating Facebook into a working and robust mobile operating system like BlackBerry 10 would mean users would utilize the Facebook platform more for things like messaging, scheduling, events, photo sharing, etc. While Facebook might not put itself on the front of every app, which could become a little overwhelming, it would be able to gather that much more user data.
The BBM idea is pure speculation and, should Facebook feign interest, it would be under its own initiative, which could be something completely different than what the market is expecting.
Shares of Facebook are down 0.9 percent while BlackBerry is up 2 percent Tuesday.
The WSJ reported Tuesday afternoon that Facebook and BlackBerry might have met recently to discuss a potential deal. BlackBerry executives flew to California to gauge interest from Facebook, though no speculation as to how the meeting went was made.
While market watchers might hate the idea of Facebook buying BlackBerry, it wouldn't be that bad. Here's a few reasons:
* Current valuation pegs BlackBerry being taken over for around $4.7 billion. Not a small sum, but Facebook could foot the bill in maybe a stock-and-debt deal given its $122 billion market cap.
* BlackBerry will get a $500 million tax refund sometime around August 2014 which would cut the price even more.
* BlackBerry has zero debt. That means all of its $2.3 billion to $2.5 billion in cash and equivalents would also trim the risk.
* Analysts generally have BlackBerry's handset unit with a zero valuation on it, so that would be shut or Facebook would immediately jump into the handset business with little initial cost.
* BlackBerry has a robust patent portfolio that analysts say could be worth $1 billion to $3 billion. That would be a licensing opportunity for Facebook.
* BlackBerry Messenger (BBM) is the biggest thing Facebook needs right now. Facebook hasn't gotten real traction with its Facebook Home initiative for Google (Nasdaq: GOOG) Android, but BlackBerry just said earlier today that its BBM app for Apple (Nasdaq: AAPL) iOS and Google Android hit 20 million downloads within the first week. There's no question that Facebook would love more exposure in mobile any way it can get it (just about half of active users accessing Facebook via a handset monthly). The dedicated BBM user base would be a perfect fit for Facebook, not to mention that the technology behind BBM is already tried and true. More investment would only bolster what is already in place.
* Finally, integrating Facebook into a working and robust mobile operating system like BlackBerry 10 would mean users would utilize the Facebook platform more for things like messaging, scheduling, events, photo sharing, etc. While Facebook might not put itself on the front of every app, which could become a little overwhelming, it would be able to gather that much more user data.
The BBM idea is pure speculation and, should Facebook feign interest, it would be under its own initiative, which could be something completely different than what the market is expecting.
Shares of Facebook are down 0.9 percent while BlackBerry is up 2 percent Tuesday.
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