On the surface, the decision by BlackBerry (BBRY) to acquire rival Good Technology makes sense. It not only eliminates a competitor, but pulls in that player’s revenue and customers under the BlackBerry umbrella.
On the other hand, there’s a reason BlackBerry stock barely budged on the news, when the same announcement made in a different time would have flung BBRY higher.
That reason is because the market is starting to accept that the once-legendary smartphone company is now just grasping at straws, none of which will make the BlackBerry stock price start to rise again for the long haul.
BlackBerry Is Buying Good Technology
The company’s overhaul from a hardware to software company isn’t exactly news to owners of BlackBerry stock at this point. CEO John Chen made it abundantly clear over the course of the first half of the year that software is the focus, and the numbers reflect it.
In the quarter ending in late May, software revenue jumped more than 150% on a year-over-year basis, to $137 million. That accounts for 20% of the company’s total quarterly revenue.
But those numbers are tempered by the total revenue picture, which fell from $966 million in the year-ago quarter to $658 million in the most recent quarter, as sales of BBRY mobile devices continued to lose ground to Apple (AAPL) and Google (GOOG, GOOGL), among others.
In that light, the $425 million purchase of Good Technology is sound. The two companies largely do the same thing — let large institutions securely manage their employees’ devices even if various mobile operating systems are being utilized — and the $160 million in annual revenue Good Technology produces will be accretive immediately after the deal is done.
Then again, buying competitors without being able to enhance either company’s existing catalog does nothing more than trade money for time to avoid accepting where BlackBerry is ultimately headed.
Reality Check for BBRY Shareholders
Kudos to John Chen for doing something, though. Many CEOs may have been willing to let the company continue to flounder, hoping it could stop it’s bleeding in-house. But, in the end, the acquisition isn’t going to alter the fact that BlackBerry offers nothing that consumers want right now.
Don’t misunderstand the message.
Sure, there’s always going to be some organization in need of a nuanced aspect of BlackBerry’s or Good Technology’s answer. In fact, some analysts are rather optimistic about the deal, thinking Good Technology’s strength in the Apple iPhone arena will give BBRY some much-needed leverage on the iOS front.
As HS Global analyst Wayne Lam put it:
“It’s going to be very, very specific in terms of what it can offer, in terms of enterprise security and software.”
In that same vein, BlackBerry is competing in an enterprise world where more established players like Citrix Systems (CTXS) and even IBM (IBM) are able to prevent BlackBerry (with or without Good Technology) from getting a foothold.
Case in point: In a poll recently taken by companies and organizations that understand enterprise mobility management, BlackBerry ranked at the low end of the scale in terms of product quality, as well as in terms of market presence.
Perhaps more alarmingly, Good Technology didn’t exactly top the charts of that same poll either.
Bottom Line for BlackBerry Stock
The combination of two mediocre companies — and that’s being generous to one of them — rarely produces a decent singular organization. It would take a very specific combination of each outfit’s unique attributes to come up with a new, truly competitive product.
If anything, Good Technology and BlackBerry are close copies of one another … at least on the software side of BlackBerry’s business.
If BBRY is really going to thrive as a provider of EMM solutions, it’s going to have to come up with something different that can’t be provided by any other company. And, it’s going to have to prove to the enterprise market that it will be around for a while to support that service.
Anything else just delays that day of reckoning.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
