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Lenovo Preparing To Buy BlackBerry?

Lenovo Preparing To Buy BlackBerry?
By Barry Levine

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Even as Lenovo is looking more seriously into the prospect, BlackBerry currently has an offer on the table. Fairfax Financial Holdings recently made a $4.7 billion bid via a letter of intent, pending a due diligence period in which it is reviewing the books and obtaining financing. If BlackBerry ended negotiations with Fairfax, it would have to pay a kill fee.
 


Is there a BlackBerry brand in Lenovo's future? That question is being raised, following reports that the China-based computer maker is seriously contemplating a bid for the beleaguered Canadian smartphone maker.

A report in Friday's Wall Street Journal, citing an unidentified source, said Lenovo was taking due diligence steps toward a possible acquisition. Previous reports had already identified Lenovo as one of several major companies that were talking with BlackBerry or had been invited by the phone maker to talk. Others being mentioned were Google, Samsung, Cisco, SAP, Intel and LG, but the new report indicates Lenovo is moving forward.

The Journal reported that Lenovo has signed a non-disclosure agreement with BlackBerry so that it can examine the company's books. Both BlackBerry and Lenovo have declined to comment.

Hewlett-Packard and Palm

On several levels, such a purchase syncs with Lenovo's positioning and history. In March, Lenovo CEO Yang Yuanqing told a French publication that his company was open to such an acquisition. In 2005, Lenovo bought IBM's computer business and focused on making computers for the business market, which aligns with BlackBerry's history and base in the business market.

A somewhat comparable precedent was when computer maker Hewlett-Packard paid $1.2 billion for Palm in 2010. However, HP abandoned the product line and platform about a year later.

Ramon Llamas, research analyst with industry research firm IDC Mobility, told us that this could be "a really interesting play" if it moved forward, but he noted that it "was fraught with questions."

He pointed out that, while Lenovo does sell phones in China, its phone presence outside that country is minimal, so it would be building on top of what BlackBerry has. A key question is whether Lenovo would want to move forward with the new BlackBerry 10 operating system, he said, which has not yet been a success, or if it would undertake the task of adapting BlackBerry's phones to, say, Android.

Which Part?

Then's there the matter of "which part of BlackBerry they want," Llamas said. Would it be the whole business, or just the enterprise-focused part? Some companies have suggested they might only be interested in buying BlackBerry's global network or their patent portfolio, for instance.

One of the biggest questions, Llamas said, is what the U.S. government, a big BlackBerry customer, might think of a China-based phone maker owning BlackBerry. Given the waves of hacker attacks emanating from that country, not to mention other inter-country issues, that factor alone might be enough to cause one of BlackBerry's largest customers to find other vendors. The same concerns are likely for the Canadian government, which would have primary regulatory approval over such a sale.

Even as Lenovo is looking more seriously into the prospect, BlackBerry currently has an offer on the table. Fairfax Financial Holdings recently made a $4.7 billion bid via a letter of intent, pending a due diligence period in which it is reviewing the books and obtaining financing. If BlackBerry ended negotiations with Fairfax, it would have to pay a kill fee of about $150 million to that firm.
 

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