BlackBerry Shares Up on Acquisition Grapevine by Fairfax

Zacks Equity Research

According to industry grapevines, BlackBerry Limited BB is likely to be acquired by Fairfax Financial Holdings as the latter aims to gain ownership of the remaining shares in the former. The reported acquisition talks by the Toronto-based financial firm led the shares of the cybersecurity software and services company to grow more than 6% to close at $4.92 as of Jun 1, 2020.

Notably, Fairfax had earlier sought to acquire BlackBerry in September 2013 for $9.00 a share. The financial holding company already owned 10% in BlackBerry and intended to make it a private entity post the acquisition to stem the losses from disappointing device sales. The large inventory of unsold devices potentially made the company a favorable acquisition target as its handsets ceded the leading market position to Apple Inc.’s AAPL iPhone and Alphabet Inc.’s GOOGL Android-powered mobiles. The transaction, however, fell flat and the consortium led by Fairfax, which planned to acquire Blackberry, decided to have a cash infusion of $1 billion instead to resurrect the struggling firm with new management at helm.

Since then, Blackberry has redefined itself as a leading player in the enterprise mobility management and is widely recognized for productivity and security innovation. The company offers one of the most secure mobile enterprise solutions in the market through a broad portfolio of products and services. It offers an end-to-end software and services platform for the Enterprise of Things, which includes computers, vehicles, sensors, equipment and other connected endpoints within the enterprise that communicate with each other to enable smart business processes.

With a holistic growth model focusing both on organic and inorganic initiatives, BlackBerry aims to expand its market leadership in the enterprise mobility segment. The company leverages many elements of its extensive technology portfolio to extend best-in-class security and reliability to its solutions for the Enterprise of Things, including unified endpoint management (UEM), cybersecurity solutions, embedded systems, crisis communications, enterprise applications and related services, with hosting available on its global, scalable, secure network, as well as in the cloud. BlackBerry continues to increase and enhance its product and service offerings through organic investments and acquisitions. The company aims to remain a leader in its target enterprise markets by extending the functionality of its secure platform and delivering innovative solutions focused on strategic industry verticals.

In particular, BlackBerry enables the Enterprise of Things by providing the technology that allows endpoints to trust one another, communicate securely and maintain privacy. Solid software sales continue to aid the Canadian company, while growth in its cybersecurity business remains a huge positive. The acquisition of Cylance has also added to the growth momentum. Cylance’s highly skilled cybersecurity workforce and market-leading portfolio of endpoint solutions are a strategic fit for Blackberry and complement its UEM and QNX businesses. Moreover, the addition of Cylance has augmented the cybersecurity capabilities of Blackberry Spark, making it an indispensable proposition for the Enterprise of Things.

Despite the positives, the stock has lost 37% in the past year compared with a decline of 17.2% for the industry.

BlackBerry currently carries a Zacks Rank #2 (Buy). Another similar-ranked stock in the industry is KT Corporation KT. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KT Corporation has a long-term earnings growth expectation of 11%.

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