Although BlackBerry has shown some stability, selling 3.4 million smartphones in the most recent quarter, the company does not present any real threat to Apple (AAPL) or Samsung (SSNLF). For Lenovo, however, there are strong synergies already in place.
Last week, BlackBerry announced plans to sell its new handset model, the BlackBerry Z3, a cheaper phone with a low-cost touch-screen designed specifically for Indonesia. The phone is also aimed at expanding BlackBerry's position in emerging markets like Asia and South America.
These are markets where Lenovo can thrive. And when you factor BlackBerry's QNX services platform, which can be used as Lenovo's push into the realm of the connected car, this deal makes sense on every level. The only issue is the cost.
Lenovo has roughly $4 billion in cash on the balance sheet and another $455 million in borrowing power. Combine this with the company's recent bond offering of $1.5 billion and its $300 million in operating cash flow, you're looking at more than $6 billion in buying power.BlackBerry has a market cap of $3.8 billion. Tack on a 30% to 40% premium, this deal can get done in the range of $5 to $5.5 billion. And in the process, Lenovo will achieve its ultimate goal, which is to narrow the gap between it and its rivals Apple and Samsung. The only questions is, will BlackBerry sell? At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned. Follow @Richard_WSPB
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV