{"id":67078,"date":"2015-01-26T05:33:26","date_gmt":"2015-01-26T10:33:26","guid":{"rendered":"http:\/\/countingpips.com\/?p=67078"},"modified":"2015-01-26T07:44:48","modified_gmt":"2015-01-26T12:44:48","slug":"why-samsung-should-buy-blackberry","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/01\/why-samsung-should-buy-blackberry\/","title":{"rendered":"Why Samsung Should Buy BlackBerry"},"content":{"rendered":"
January 26, 2015<\/div>
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By WallStreetDaily.com<\/span><\/a> \"Why<\/p>\n

By Louis Basenese<\/a>, Chief Technology Analyst <\/em><\/p>\n

It\u2019s no secret that the once-great telecom company, BlackBerry<\/strong> (BBRY<\/a>), has endured a brutal few years.<\/p>\n

But unknown \u2013 and unreported \u2013 by many, the beleaguered firm has one saving grace\u2026<\/p>\n

Its lucrative patent portfolio.<\/p>\n

That\u2019s what I told Kelly Evans and Bill Griffeth on CNBC\u2019s Closing Bell<\/em><\/a> last September. And its salvation almost came to fruition.<\/p>

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On January 14, BlackBerry shares soared by nearly 30% on rumors that it would be bought out for its patent portfolio.<\/p>\n

Hours later, though, the reports were vehemently denied, sending shares crashing back to Earth.<\/p>\n

However, I\u2019m convinced that shares could ultimately soar again. And here\u2019s the smartest (read: safest) way to play it\u2026<\/p>\n

Deny, Deny, Deny<\/h2>\n

When news emerged from Reuters<\/em> that Samsung Electronics<\/strong> (SSNLF<\/a>) had approached BlackBerry with a takeover offer in the range of $13.35 to $15.49 per share, it valued BlackBerry at roughly $7.1 billion, 24 times its EBITDA, or 1.9 times revenue.<\/p>\n

It was a valuation not seen for the smartphone maker in years \u2013 hence the sudden stock price surge.<\/p>\n

True to Wall Street form, both companies immediately denied the reports.<\/p>\n

Spokespeople said, \u201cBlackBerry hasn\u2019t engaged in discussions with Samsung with respect to any possible offer to purchase BlackBerry.\u201d And Samsung said the report was \u201cgroundless.\u201d<\/p>\n

But the denials don\u2019t pass the smell test.<\/p>\n

Reuters<\/em> cited awfully specific numbers for the claims to have been fabricated. Not to mention, the reporter said she\u2019d reviewed actual documents.<\/p>\n

Let\u2019s not forget, either\u2026 BlackBerry\u2019s CEO, John Chen, is famous for turning around another struggling tech company, Sybase, Inc., and then selling it for $5.8 billion to SAP AG <\/strong>(SAP<\/a>).<\/p>\n

Chen is a dealmaker \u2013 and a tie-up between these two companies actually makes perfect sense. Let me explain\u2026<\/p>\n

Why BlackBerry and Samsung Need to Make a Deal<\/h2>\n

There\u2019s no doubt about it\u2026 BlackBerry is on the ropes. Sucking wind.<\/p>\n

I\u2019d go as far as saying that it\u2019s the mobile industry\u2019s version of RadioShack<\/strong><\/a> (RSH<\/a>) \u2013 increasingly irrelevant and destined for the courthouse steps.<\/p>\n

Want proof?<\/p>\n

In 2009, BlackBerry was one of the world\u2019s top-selling smartphone makers, commanding a U.S. market share of almost 50%.<\/p>\n

Today, its market share has evaporated to just 1%.<\/p>\n

While BlackBerry is doubling down on its software business \u2013 and gaining traction in the market \u2013 the company\u2019s overall revenue continues to decline. Third-quarter sales fell to $793 million from $1.19 billion a year earlier. And handset sales still account for 46% of revenue.<\/p>\n

As for Samsung\u2026 well, it\u2019s struggling, too.<\/p>\n

The company faces increasing high-end competition from Apple<\/strong> (AAPL<\/a>) \u2013 even on its home turf of South Korea. The latest monthly report from Hong Kong market research company Counterpoint reveals that Apple captured a record 33% market share in South Korea in November.<\/p>\n

Competition is also fierce in the mid-range of the market, too, where Chinese manufacturers like Xiaomi Corp. are threatening Samsung\u2019s dominance.<\/p>\n

This impact isn\u2019t just perceived, either\u2026 it\u2019s measurable.<\/p>\n

In the last quarter, Samsung shocked the market by reporting a 74% year-over-year drop<\/em> in operating profit for its mobile business.<\/p>\n

Add it up, and what do we have?<\/p>\n

BlackBerry is trying to stave off obsolescence. And Samsung is trying to maintain its competitiveness.<\/p>\n

So a combination of the companies accomplishes both objectives.<\/p>\n

1 +1 = 3?<\/h2>\n

Despite its well-documented woes, one thing BlackBerry has consistently done well is innovate. The proof is in the patents.<\/p>\n

Each year, BlackBerry ranks in the top 75 for patent recipients. For the last three years, it\u2019s been granted over 1,000 patents annually.
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\nAll told, BlackBerry now owns about 44,000 patents, according to Desmond Lau, an analyst at Veritas Investment Research Corp.<\/p>\n

In the United States, it holds 7,380 patents and has another 3,374 applications, according to MDB Capital\u2019s PatentVest database.<\/p>\n

Unsurprisingly, BlackBerry is trying to leverage these innovations to bring about a turnaround. But it\u2019s no easy feat. And the last thing Chen wants to do is fail\u2026 and then watch scavengers devour the patent portfolio after a bankruptcy filing.<\/p>\n

And scavengers are already circling.<\/p>\n

As The Globe and Mail<\/em> recently reported, BlackBerry \u201chas shunned a handful of potential buyers in recent months.\u201d<\/p>\n

However, I believe Samsung represents a totally different buyer altogether. Because of overlapping and complimentary business interests, it would actually offer the best guarantee to BlackBerry that the value of its treasure trove of patents would be maximized.<\/p>\n

Why? Consider this\u2026<\/p>\n