Everything affects the stock market. Wars, the weather, everything. That’s why it might have seemed odd to see BlackBerry’s stock jump about 7 percent in after hours trading today following Facebook’s announcement that it will acquire WhatsApp. What does that acquisition have to do with BlackBerry? On the surface it probably seems like nothing at all, but really it shows that there’s still quite a bit of value left in BlackBerry – and it shows that the company, too, remains a ripe takeover target.
BlackBerry’s current market cap – the value of all of its issued shares – is $4.7 billion. BlackBerry still makes smartphones, sells enterprise software and owns BlackBerry Messenger (BBM). WhatsApp just sold to Facebook for $19 billion in cash, stock and restricted stock. BlackBerry is a large, complicated company with a fabled history in the technology industry. WhatsApp is relatively young, has around 50 employees, and owns a single and very simple application, though one with a massive user base of 450 million monthly active users. The real attraction to WhatsApp is likely its incredible growth – the company adds about 1 million users per day. BlackBerry has about 80 million active BBM users – though the platform is arguably more powerful, with voice calling, video chat, channels for brands to talk to consumers on and more.
Do you see what I’m getting at?
The WhatsApp acquisition shows the value of BlackBerry and, more specifically, the value of BlackBerry Messenger and its users. If we dissect the figures a bit, we can see why shares of BlackBerry are climbing – and that’s because there are probably investors out there who think the firm is undervalued.
Let’s look at the figures: WhatsApp sold for about $19 billion with 450 million monthly active users. That equates to about $42.22 per user. If we take that same figure and apply it to the BBM userbase of 80 million active users, we get $3.37 billion. And that would be just for the users, because there’s also added value in BlackBerry Messenger’s features. Channels, for example, is already a foundation that could allow any potential acquirer to begin advertising through immediately. Right now, WhatsApp doesn’t have any ads and there don’t appear to be any immediate plans to add them. So while the service is amazing to us end users, Facebook will need to show investors how it ultimately plans to turn a profit from that huge $16 billion and, ultimately $19 billion, investment.
And here we’re only talking about BBM. We’re not even getting into BlackBerry’s patent portfolio, which many have suggested was the only reason any company would purchase BlackBerry anyway. As of last year, analysts speaking to Bloomberg pegged the value of BlackBerry patent portfolio somewhere between $1 billion and $3 billion. Combine that with a potential BBM value of $3.37 billion and you’re looking at a value of around $4.37 billion to $6.37 billion, the latter figure almost $2 billion more than the company’s market cap. That’s not taking into consideration any of the company’s other assets or services.
Now the harder question: who would buy BlackBerry for BBM?
Microsoft could use a boost in the messaging space. Skype currently has around 280 million monthly active users, and folding in support with BlackBerry Messenger could help boost it to go toe-to-toe against Facebook/WhatsApp. Amazon could potentially use the BlackBerry Messenger foundation – remember it now runs on Android – to roll out a messaging service across its Kindle Fire devices and its rumored smartphone. Google could add features to Google Hangouts – I for one am still waiting for a real service that can take on iMessage and this would do it. Or a large Chinese smartphone maker could try to swoop in – pending approval from Canadian regulators – and make a bid. Lenovo tops my guess in that department, though rumors have suggested it would face the aforementioned government roadblocks, and it already spent a bunch of cash on Motorola Mobility.
So while most investors pointed to BlackBerry’s patent portfolio as the foundation for its real value, Facebook showed us today that, perhaps, BlackBerry Messenger could be the winning ticket in BlackBerry’s pocket. Did Facebook overpay for WhatsApp? Perhaps, and that would certainly change the per-user value of BlackBerry Messenger – but if there’s a larger company out there that wants to come in and take-on Facebook/WhatsApp, BlackBerry now looks more desirable than ever.