Microsoft and Blackberry?

QUESTION OF THE WEEK

This week, Microsoft finally bought out Nokia’s wireless handset business for $7 billion. At the same time, reports circulated that Blackberry was plotting to get itself sold, hopefully quickly. Can or should Microsoft buy Blackberry too? 

Most would agree that Microsoft has missed the smartphone revolution and is now only doing what it can to stay relevant with the Nokia purchase. Interestingly, Microsoft spent only about 10% of its cash for the Nokia purchase, which leaves plenty of resources for another acquisition.

In examining a potential Blackberry purchase price, the company has a market cap of about $5.6 billion. If you add a 35% premium to that (similar to the premium paid to get Nokia) then we come out to roughly $7.5 billion or just under $15 a share for Blackberry. This is the same amount Microsoft just paid for Nokia. Also, Blackberry has no debt and holds $3 billion in cash which means Microsoft only has to put up roughly $4 billion of their own cash. What's another $4 billion for Microsoft to stay relevant? So looking at the big picture, MSFT only has to spend roughly 15% of its cash holdings and it ends up gobbling up the 3^rdand 4^th spot in smartphone market share. BlackBerry's operating system is far superior to Windows mobile and Blackberry's 70 million users would certainly enjoy the Windows ecosystem. A move to purchase Blackberry quickly puts Microsoft back in the mobile market, and allows them to be on the forefront of mobile computing. Microsoft shareholders could no longer complain the company was not doing much to create value for shareholders.

By The RM Group at Richardson GMP Limited. Our Group can help you.

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