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BlackBerry Met With Facebook Last Week on Potential Bid

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Mr_Dupri

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BlackBerry photo 2013-10-29T185116Z_1_CBRE99S1GDW00_RTROPTP_3_BLACKBERRY-OFFER-FAIRFAX_original_zpsa81aab70.jpg

BlackBerry Ltd. (BBRY) executives flew to California to meet with Facebook Inc. (FB) last week to gauge its interest in a potential bid for the struggling smartphone-maker, according to people familiar with the matter.

It remains unclear whether Facebook is interested in placing a bid. Spokesmen for both companies declined to comment.

The meeting could reignite speculation that Facebook is building its own smartphone. As the social network has increasingly catered to mobile users in recent years, with nearly half of its sales generated from ads shown on wireless devices, it has also grown dependent on hardware makers such as Apple Inc. and Samsung Electronics Co. to distribute its software and collect user data.

Buying BlackBerry would let Facebook cut out these partners and sell a line of its own phones directly to its most rabid users. Still, Facebook CEO Mark Zuckerberg has publicly denied wanting to build his own phone, calling this the ”wrong strategy.” As an alternative, the company has pursued deeper partnerships with manufacturers on mobile software called Facebook Home.

Any potential BlackBerry bidder would have a number of assets to look over, though the value of each asset is up for debate.

BlackBerry is sitting on about $2.6 billion in cash and has no debt, though that cash pile is starting to erode as the company deals with weak phone sales, inventory pile up and layoffs.

The most attractive piece for a company like Facebook will most likely be BlackBerry’s patents, which consist of security network technology and smartphone component patents, among others, and which analysts estimate to be worth between $1 and $3 billion.

And for a company looking to get a jump-start in the smartphone game, BlackBerry still has around 70 million subscribers around the world (though BlackBerry no longer reports that figure, which is likely smaller now).

And BlackBerry is seeing renewed interest in its BlackBerry Messenger tool, which might interest a potential buyer. The company announced Tuesday that there are now 20 million iPhone and Android users using BBM, and more than 80 million total monthly active users.

Last month BlackBerry struck a preliminary deal to go private with Canadian insurer Fairfax Financial Holdings Ltd. for $4.7 billion, or $9 a share. The due diligence period for that deal ends next week, but BlackBerry and its advisers remain open to interest from other potential bidders. The deadline for other bids is Monday.

BlackBerry’s stock is currently trading under $9. On Tuesday the shares rose about 1.3% to $8.31. Facebook’s stock was down 1.6% to $49.41.

BlackBerry does have other players circling. Earlier this month The Wall Street Journal reported that Chinese computer giant Lenovo Group Ltd. was interested in a possible bid. And BlackBerry has signed a nondisclosure agreement with distressed asset specialists Cerberus Captial Management LP, people familiar with the matter have said.

BlackBerry’s co-founders, Mike Lazaridis and Doug Fregin are also weighing a bid, according to a Securities and Exchange Commission filing earlier this month.

After years of seeing its share of the smartphone market erode, BlackBerry in August announced a wide-ranging strategic review that essentially put the company up for sale. The company wrote down nearly $1 billion in unsold smartphone inventory, and is in the process of cutting 40% of its staff.

By Will Connors and Dana Mattioli

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