Mumbai: Barely a month after billionaire Prem Watsa, former BlackBerry director and current chief executive officer of financial services holding company Fairfax, proposed a $4.7 billion buyout of Canadian handset maker BlackBerry, Chinese PC giant Lenovo has made a counter bid.
This comes after reports earlier this month that BlackBerry's co-founders Mike Lazaridis and Douglas Fregin were also mulling buying out Blackberry. Together, the two co-founders hold 8% in the company, compared with Watsa's 10% majority shareholding.
Lenovo has not disclosed the bid amount. "We do not comment on market rumours and speculation," said a spokesperson.
Going by news reports, this is not the first time Lenovo has bid for BlackBerry - it had shown interest in a possible buyout as recently as the beginning of this year. It is believed that Lenovo has also obtained access to BlackBerry's account books.
The Lenovo offer comes just two weeks before the November 4 deadline for Watsa's acquisition of BlackBerry. According to a prior agreement signed between BlackBerry and Fairfax, Watsa stands to gain a huge payout from BlackBerry in case his deal is discarded.
So what's in it for Lenovo?
For one, the PC maker, which saw revenues jump 10% in the quarter ended June to $8.8 billion, has said that its smartphone and tablet sales increased 105% on-year to $1.2 billion, accounting for 14% of the pie, compared with a 4.7% increase in laptop sales and a 2.8% decline in sales of PCs, its core business. Lenovo has already beaten Chinese smartphone leader ZTE in its home market China. The country now accounts for 42% of Lenovo's smartphone (pictured) sales - raising the heat on smartphone biggies Samsung and Apple. Acquiring BlackBerry is bound to increase its share further.
Second, globally, Lenovo still has a long way to go in building its brand name, while BlackBerry has much greater recall.
Third, Lenovo may be eyeing an IBM redux. The acquisition of IBM for less than $1 billion in 2005 was key to making it the world's number one PC maker. A BlackBerry buyout could do the same for it in the smartphone space.
Fourth, Lenovo has very strong hardware backing, which could help it strengthen BlackBerry. Watsa, in comparison, is said to have little technical knowhow, being more of a 'numbers' guy.
"Apart from lurking competition from Microsoft, which recently acquired Nokia, and was rumoured to also have an interest in BlackBerry, Lenovo today is globally regarded as a white-label or grey market smartphone player, holding number 4 or 5 position in the world, mainly catering to the mid and low-end user segment. On the other hand, BlackBerry has very strong corporate usage and a brand name, so the acquisition could help Lenovo leverage itself as a corporate, enterprise player catering to the high-end segment as well, while BlackBerry, which has been yet unable to reach the mid and lower end users even after introducing tablets and touch, may benefit from Lenovo's forte in this market," said Sandip Biswas, CEO of Lacewood Consulting, Strategy and Operations Advisory.
He believes Lenovo won't bring technical innovation to BlackBerry and is more likely to use it as a corporate facelift, though "it will have to do something to beat growing competition from Android and Apple."
Lenovo may also be interested in BlackBerry's wireless patents for security and enterprise communications, said another expert, requesting anonymity.
A deal spoiler for Lenovo could, however, be the fact that out of the 6 lakh mobile devices used by the Pentagon, 4.7 lakh are BlackBerrys, compared with 41,000 Apple devices and 8,700 Android smartphones. Encryption, which is at the core of BlackBerry's security platform, could be questioned if sold to Lenovo, a company whose Chinese origins have high security scrutiny worldwide.
Lenovo would also have to invest a lot in re-building BlackBerry's ailing handsets business.
And finally, it would need to provide for the amount BlackBerry has to pay Watsa.