Following a larger than expected drop in revenue during the third quarter in December 2014, Korean smartphone giant Samsung has offered to buy out its struggling rival Blackberry. The firm will be sold for as much as $7.5bn (£4.92bn). Described by Chief Executive, John Chen, as “not satisfying”, the firm‘s revenue failed to meet analyst expectations for the previous year, falling to $793m (£570m) from $1.19bn. Despite being unable to promise profitability, however, Blackberry reported hopes to be able to further stabilise the company and increase its revenue by 2016. In more successful times, Blackberry claimed around 50% of the US smartphone market.
After Samsung‘s plans were revealed Blackberry witnessed a huge share price surge on Wednesday, rising by 30% in US trade; the firm‘s biggest gain in about a decade. Yet even after this sharp shares rise the company‘s worth still remains at a considerably small $5.5bn. With Blackberry‘s portfolio of around 44,000 patents worth up to $1.4bn (of which many analysts believe holds a higher true value) Samsung is supposedly prepared to bid up to $15.49 a share.
Despite these suggestions of a company handover, a spokesperson from Samsung reported that media reports of the acquisition were “groundless”, with Blackberry itself describing that they were not yet engaged in discussions with Samsung, in spite of current press reports that executives from both firms were to discuss a potential deal last week.
Following unofficial after-market trading which was sparked by these denials, shares later fell by a further 15%. Bets on shares rising above $12 had been most heavily traded, worth 8 cents at the start of Wednesday, which fell to $1.31 by the close of trading.
The South Korean based company‘s interest in Blackberry is obvious, however, centring on the firm‘s strong presence which remains in the corporate smartphone market. Yet with Blackberry reported to be against selling specific assets of the company, Samsung‘s bid will have to be an influential one for the whole firm.
Samsung‘s challenges do not end there in gaining control of Blackberry, however, as approval of foreign takeover would be necessary from the likes of the Canadian government. With Blackberry currently managing the email traffic of government and military agencies for Washington DC, as well as a number of corporate customers, approval of the deal would likely be required from the committee on foreign investment in the U.S.
A vast amount of Samsung handset sales have come into the consumer market where profit margins are eroded by fast-growing competition, particularly from Chinese manufacturers, so Samsung‘s bid for Blackberry could be a hugely beneficial deal for the firm.
2015 is set to bring impacting decisions for Blackberry and changes to the smartphone market.