According to the latest round of rumors, the Korean smartphone giant Samsung (SSNLF, Financial) made a generous offer to buy BlackBerry (BBRY, Financial) for as much as $7.5 billion. The deal values BlackBerry at a good premium over the company’s current trading price. Investors, analysts and industry experts responded well to the news as stock price surged almost 30%.
However, it seems the rumors weren’t much accurate and BlackBerry cleared the air of doubt by mentioning that it hasn’t entered into any discussion with Samsung over a possible merger. On this news the stock dropped 15% in after-hours trading, clearly suggesting the Wall Street would have liked the two companies to carry on with the deal. But, how beneficial will the deal be for the tech giants?
How the deal can help BlackBerry
For a long time now I have been following BlackBerry and to be honest, despite its inability to hold on to its ace position in the smartphone market, it’s one of my favorite companies in the tech space. The Canadian ace phone maker lost out to agile and energetic competitors like Apple (AAPL, Financial) and Samsung, and now, John Chen, the current CEO wishes to steer the company in a new direction – software security. According to John the company’s expertise lies in software security. However the tech giant has no plans to discontinue its handset business. The new models such as Passport and Classic are aimed at the enterprise customers. This is where the deal with Samsung can benefit the company.
Since the handset business will still be there, it’s worth it to revive the business and again make it a strong pillar, contributing significantly to the top-line. Samsung understands what the customers are looking for and how to market that. On the back of strong marketing abilities the brand has attracted huge attention and all that has paid off as well. Second thing that can benefit Blackberry is Samsung’s vast and wide distribution channel. BlackBerry shareholders are probably getting excited about the deal because they feel Samsung can bring about required changes to boost the company’s top-line and bottom-line, ultimately resulting in increased shareholder’s value.
How the deal can help Samsung
For Samsung the benefits from the deal are countless. However, to point out a few, the deal will help the Korean company make inroads into the corporate market. Through its Galaxy series of smartphones the company has become a favorite of the consumers and is the world’s leading smartphone shipper. But the company has no exposure in the enterprise customer market. BlackBerry is a highly reputed company and top notch government agencies rely on it for their software security requirements. Security has turned out to be an important aspect for all organizations and BlackBerry’s solutions are considered to be the gold standard of the space.
Second, the deal will help Samsung gain access to BlackBerry’s priceless collection of patents, which will in turn help Samsung gain grounds against Apple. The rivalry between the Cupertino tech company and Samsung is not hidden from anyone. They have battled in the courts and outside and both have paid compensation to one another. With BlackBerry’s patents under its belt, Samsung will be able to devise new technologies and restrict their usage by peers, resulting in a competitive edge.
Thirdly, for some time now Samsung has been working on its own operating system so that it can reduce its dependence on Google (GOOG, Financial). Here, BlackBerry’s established experience with mobile operating systems can prove to be much valuable. Over all the acquisition will benefit both the parties, but Samsung is positioned to get more benefits. After the acquisition Samsung’s share of the worldwide smartphone space will expand. The Korean major will have operations in both consumer and enterprise markets, which will help it to stand strong against pressure from rivals.
