BlackBerry's (BBRY) 'WhatsApp Run' May Have Made BBM Too Expensive
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BlackBerry (Nasdaq: BBRY) has seen an 18 percent rally since Facebook (Nasdaq: FB) announced plan to acquire WhatsApp in a $19 billion deal, as many speculate that BBM will draw a similar valuation.
However, the recent run in BlackBerry shares also puts the price of BBM at around $3.6 billion. According to BGC Partners, potential buyers won't be willing to pay that much for the business because its lacks the scale that WhatsApp has.
How much smaller is BBM? Data compiled by Bloomberg shows that, even doubling user additions from its current rate of 2.8 million per month, the business won't meet WhatsApp's level until 2019. At last check, BBM has about 85 million users, from 60 million reported last May. By comparison, WhatsApp is said to have over 450 million users.
Facebook CEO Mark Zuckerberg said last week that WhatsApp is adding 1 million users a day, easily outpacing BBM additions. BGC also pointed out that in this particular operating space (social media), the bigger name draws the greater premium. That means comparing BBM to WhatsApp wouldn't necessarily be apples-to-apples and the same valuation per user shouldn't be applied.
BlackBerry CEO John Chen said just yesterday that the company would eventually spin BBM, but not before its able to create more value for the segment. BBM does have a secure network and its working on creating different channels for the service. The company might be able to work its way into the enterprise segment and charge a premium there for extra security, but that won't be an overnight effort.
BlackBerry shares are down about 1 percent.
However, the recent run in BlackBerry shares also puts the price of BBM at around $3.6 billion. According to BGC Partners, potential buyers won't be willing to pay that much for the business because its lacks the scale that WhatsApp has.
How much smaller is BBM? Data compiled by Bloomberg shows that, even doubling user additions from its current rate of 2.8 million per month, the business won't meet WhatsApp's level until 2019. At last check, BBM has about 85 million users, from 60 million reported last May. By comparison, WhatsApp is said to have over 450 million users.
Facebook CEO Mark Zuckerberg said last week that WhatsApp is adding 1 million users a day, easily outpacing BBM additions. BGC also pointed out that in this particular operating space (social media), the bigger name draws the greater premium. That means comparing BBM to WhatsApp wouldn't necessarily be apples-to-apples and the same valuation per user shouldn't be applied.
BlackBerry CEO John Chen said just yesterday that the company would eventually spin BBM, but not before its able to create more value for the segment. BBM does have a secure network and its working on creating different channels for the service. The company might be able to work its way into the enterprise segment and charge a premium there for extra security, but that won't be an overnight effort.
BlackBerry shares are down about 1 percent.
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