BlackBerry – Good times?

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Integration and execution key to success.

• BlackBerry has agreed to buy its rival Good Technologies for $425m in cash, underlining my view that BlackBerry’s days as a handset vendor are numbered.
• Good has had a chequered history after being purchased by Motorola, then being sold on to Visto and now finally being sold again to BlackBerry.
• All this toing and froing has almost certainly slowed up its development, but progress over the last few years has been pretty good.
• Between 2012A and 2014A, revenues have increased from $117m to $212m with gross margins remaining in the low seventies.
• Good Technology has long been known for enterprise mobility software that allows employees to securely access their email, calendar and contacts from any mobile device but that is only part of the story.
• The most interesting part of Good has always been its platform from which any functionality from within the enterprise can be extended out into mobile.
• It is this functionality that I suspect made it appeal particularly to BlackBerry.
• BlackBerry arguably has the best security in the market but its platform has been shown time and again to be badly wanting when it comes to anything beyond text.
• Despite this, BlackBerry still has far more customers than all of the other players put together (except Microsoft) meaning that there is scope for big synergies as a result of this acquisition.
• If BlackBerry’s enterprise server (BES) customers can also become users of the Good Technology platform then its will have gained an edge giving its customers reasons to continue paying a subscription.
• Furthermore, if it can execute the transition flawlessly, there may even be scope to get a price increase as the Good functionality should do wonders for BES functionality.
• The caveat of course is integration and execution.
• Both the BES and Good have been around for a long time meaning that there will be a lot of old legacy code floating around inside these products.
• This means that the integration of the two systems will be very tricky, but this is something that BlackBerry and Good have to get right.
• For me, this is the key risk of this acquisition as without a seamless integration, the upside opportunity in terms of revenue is likely to be very limited.
• This acquisition represents just over one third of BlackBerry’s available cash balance and I think that it sends another clear signal of where the future lies.
• BlackBerry’s device market share is now so small that it is just not worth the investment to try and use hardware to deliver its service.
• Mobile devices are now such a commodity that there is no reason whatsoever for BlackBerry to still be making them.
• With a differentiated enterprise mobility offering it has a chance to deliver good returns but the longer it holds onto hardware, the greater the losses that are likely to be incurred.
• I still struggle to see value in BlackBerry while hardware still exists and Good still has to be integrated, but there is a tiny whiff of a recovery in the air.