It's deja vu all over again. On March 11, a Lenovo executive speculated about acquiring smartphone manufacturer BlackBerry (NYSE:BB). Lenovo CEO Yang Yuanqing's recent quote in a French paper, in which he says he would "eventually consider buying" BlackBerry, comes just a couple of months after Lenovo's CFO, Wong Wai Ming, alluded to the same thing.
Buyout talk makes for interesting water-cooler discussions, but does it suddenly make BlackBerry a better investment today than it was last week?
Investing in buyout talk can be risky
Shareholders sure didn't mind Yuanqing's latest blurb in the French paper; BlackBerry's stock price jumped 14% on Monday. BlackBerry CEO Thorsten Heins isn't talking about the latest quotes, but he previously said he didn't know why Ming had made similar remarks. Unless there are stealthy meetings going on, Heins is probably wondering the same thing this go-round, too.
Though not entirely opposed to discussing a deal for BlackBerry, Heins has made it pretty clear he'd rather focus on the Z10 and Q10 rollouts, exploring licensing opportunities for BB10 and other revenue-generating initiatives, rather than put BlackBerry on the auction block. And in spite of BlackBerry's recent stock-price jump, buyouts are far from a sure thing for investors.
In some cases, acquisitions can pay off, as Heinz shareholders found out recently following Warren Buffett's attempt to get heavy into ketchup.
However, Dell offers the opposite side of the buyout coin. Initially, Dell owners were ecstatic with the 25% premium CEO Michael Dell and his group offered. But they quickly came down to Earth after big-time investors, including Carl Icahn, T. Rowe Price, and others, started grumbling about its valuation. The Dell deal may still get done, but it demonstrates the uncertainties surrounding investing on rumors, particularly buyout rumors.
What to really focus on
For mid- to long-term investors, BlackBerry only makes sense if it can accomplish Heins' aggressive objectives, such as expanding revenue streams and winning back market share. But it's a tall order to put a crimp in Apple's (NASDAQ:AAPL) domestic iPhone dominance and 21% share of the global OS market, Samsung's various smartphone alternatives, or Google's (NASDAQ:GOOGL) Android with its nearly 70% share of worldwide mobile devices running its Android OS. Unfortunately for BlackBerry, even its own backyard -- the enterprise market -- is getting harder to win.
As the lines between the personal and professional smartphone markets fade, Apple, Samsung, and Google become even more worrisome for BlackBerry. Some pooh-poohed the notion that Home Depot's decision to switch 10,000 of its executives from BlackBerrys to iPhones was significant. But the Home Depot news indicates a changing marketplace where more employees bring their own devices to work. Then there's Samsung's new Knox app, which allows its Google Android OS phone customers to securely switch between work and personal use. Those trends leave BlackBerry directly in the path of the biggest of the big hitters.
AT&T's decision to begin offering BlackBerry's new Z10 in the States on March 22 was welcome news. Getting the Z10 in the hands of the domestic masses is good in and of itself, but doing it on schedule is an even better sign. After initial delays in the domestic release of the Z10 (the Q10 is now slated for May, give or take), BlackBerry appears to have gotten a handle on this most critical of rollouts.
Investors need to focus on BlackBerry's potential for sales growth, not on Lenovo executives' comments to French newspaper reporters. Buying a company because of the latest rumor is always a scary proposition. But investing based on takeover talk ratchets up the risk even higher, since any number of variables can nix a deal. Disgruntled shareholders, regulatory hurdles, or simply trying to agree on price can kill an acquisition, leaving investors high and dry.
BlackBerry's future prospects are still dependent on accomplishing the same things: the successful adoption of its new BB10 OS, getting its Z10 and Q10 in the hands of consumers in a timely fashion, and exploring additional revenue opportunities like licensing BB10 and developing strategic partnerships. If, like me, you believe BlackBerry warrants consideration based on BB10 results and strategic management initiatives, then it's a sound, though aggressive, growth play. But if you're going to buy, buy BlackBerry the company, not the rumors.