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Will Facebook Bid on BlackBerry? Unlikely, But Not Impossible

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On Tuesday afternoon, reports circulated that BlackBerry  (NASDAQ: BBRY  ) executives met with Facebook (NASDAQ: FB  ) last week to gauge interest in a possible bid. Both companies declined to comment on the story, but there are three reasons I believe a Facebook bid for BlackBerry is highly unlikely.

1. Mark Zuckerberg

Facebook founder and CEO Mark Zuckerberg has said that a Facebook Phone doesn't make sense. Rather, he's made it clear that Facebook's mobile strategy is to build a system that is integrated into all smart phones. Perhaps if Zuckerberg had previously said that he was interested in developing a Facebook Phone then a bid for BlackBerry would make sense. But that's not the case. Given that, it's tough to see why Facebook would be interested in BlackBerry.

2. BlackBerry Stock Reaction

After it was announced that BlackBerry executives met with Facebook about potential interest, as shown by the chart below, shares of BlackBerry immediately spiked by all of 2.5%. This is hardly the move one would expect if the Facebook news was meaningful.

Furthermore, despite a rally in the broader stock market indices, BlackBerry shares finished the session higher by just 1.4%. The takeaway from the trading action in BlackBerry following this announcement is that institutional investors -- the people who move stocks -- don't believe that Facebook is interested. Institutional investors tend to be the most well informed and thus the best investors to follow. Simply put, the smart money is not betting on a Facebook bid.

BBRY Chart

BBRY data by YCharts

3. Brand

The BlackBerry brand, at least what's of it, is not at all similar to the Facebook brand. BlackBerry focuses on business and government customers, and the company wants users to associate "network security" with its phones, not "cool." On the other hand, Facebook focuses on young adults and wants to be cool.

Reasons Facebook might be interested

While I believe a Facebook bid for BlackBerry is highly unlikely, it is not impossible.

Mark Zuckerberg could have changed his mind about a Facebook Phone. After all, a Facebook Phone wouldn't prevent users from accessing Facebook on other smart phones.The business strategy of integrating with everyone would still make sense.

Another reason Facebook might be attracted to BlackBerry is the current valuation. Given the company's large cash hoard and valuable patent portfolio, Facebook could view the deal as a low-risk, high-reward deal.


News that BlackBerry executives met with Facebook is not a reason to buy BlackBerry shares. Mark Zuckerberg's opposition to a Facebook Phone, the lack of institutional buying, and misalignment of brands are all reasons I believe a Facebook bid for BlackBerry is higher unlikely.

That is not to say that I believe a bid is impossible. Perhaps as soon as tomorrow, I expect Facebook to put out a public release stating that it is not an interested buyer of BlackBerry. However, if days pass and Facebook does not put out such a release, then it will become at least a little more likely that a deal is possible.

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9/23/2016 4:00 PM
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