Is BlackBerry Flirting for a Buyout Bid from Facebook?

Technical Analysis by: Rajiv Singh

BBM Finally Endorses iOS and Android; Clocks 20 million New Users in First Week

As a follow-up to our earlier story on BlackBerry Ltd. (NASDAQ: BBRY), the beleaguered Canadian phone maker appears to have a financial savior in Facebook (NASDAQ: FB), the world’s largest social media company. According to Wall Street Journal, BlackBerry met with Facebook officials last week to discuss the possibility of a buy-in. While Lenovo, Amazon, Cisco, Google, and SAP have evinced interest in the company, it is unclear as to whether Facebook is interested to join the list of potential bidders. Back in August, BlackBerry had stated that it was exploring options that could include an outright sale after having steadily lost market share to rivals in recent years. Moreover, BlackBerry’s future prospects appear bleak after the all-touch-screen Z10 and a keyboard-equipped Q10, which were launched earlier this year, failed to create market ripples. Adding to the list of potential suitors, financial companies in Canada and the US, such as Canada Pension Plan Investment Board and Bain Capital, are also expected to consider bids.

Facebook Could See Synergies with BlackBerry’s Smartphones Business

It is also a matter of speculation as to where Facebook’s interest in BlackBerry might lie. Facebook would definitely be interested in the BlackBerry Messenger (BBM), as opposed to going into the phone-making business. Facebook earlier had plans to come out with a Facebook-branded phone in a tie-up with Taiwanese smartphone maker HTC Corp. This new phone was to be specifically optimized for Facebook apps and services and was dubbed HTC First.Facebookhad also invested a lot of time and effort to develop a suite of Android apps that were aimed at integrating Facebook services into third-party phones.However, the company has not specifically made any announcements about any concrete plans to design, manufacture, and distribute mobile phones. This is because the company considers such an idea unfeasible, given that the phone would serve only 1-2% of its 1.15 billion active users. On the other hand, mobile messaging is an area of interest to Facebook, given that it is looking to compete with WhatsApp, which now has 300 million active users. Facebook has also upgraded its Messenger app to better integrate it with smartphone convos with friends and address book contacts.

BlackBerry’s Hardware Device Business Seen as Least Lucrative to Bidders

BlackBerry is a major developer of hardware and software solutions for mobile communications. It also provides platforms and solutions that support multiple wireless network standards through integrated hardware and software services.Industry experts believe that potential bidder’s may not be interested in the entire company, but rather BlackBerry’s hardware and network assets that would synergize with their own businesses. While BlackBerry’s hardware device business is the least lucrative of the company’s assets, interested companies have an eye on its cellular and security patents, enterprise software, and QNX operating system. However, these divisions will have to be shut down if the company is purchased as a whole. While BlackBerry’s patent portfolio is estimated to be worth around $2 billion, its secure software network has long been considered the industry gold standard, and the company still has about $3 billion in cash.

BBM Registers 20 million New Active Users in First Week

In a positive development, BlackBerry announced that 20 million users have downloaded its BlackBerry Messenger app for iOS and Android devices in the first week of its launch. BBM now has more than 80 million active users across BlackBerry, Android, and iPhone devices globally. In the coming months, BlackBerry will offer video calling and voice calling on BBM. In addition, it will start BBM Channels, a new community building service, to connect BBM users to Android and iPhone users. During its first week, BBM was the top free overall application in 35 countries in Google Play and in 107 countries in the App Store. Going forward, the company plans to focus on active users of BBM and not just on simple downloads.

Technical Analysis on BlackBerry

BlackBerry technical indicators suggest a Strong Buy at the current level. Candlestick forms an inverted hammer shape, which is normally seen after a decline or downtrend, and suggests a potential trend reversal or support levels. The tightening of Bollinger bands is an early indication that the volatility is about to increase sharply. BlackBerry is trading above most of its simple moving averages and gives a bullish signal for investors. With RSI around 50 and MACD above signal line, these indicators further support the bullish trend on the stock with a short-term target of $8.53.

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